Francisco Rivadeneyra is the Director for CBDC & FinTech Policy and Research at the Bank of Canada. In this role he leads a team developing policy advice in areas of central bank digital currency, electronic money and payments, and the implications for central banks of broader financial innovations. He also is an active researcher working in the intersection of technology, payments infrastructures and finance. His current research studies the security and convenience trade-off of digital currencies and the use of artificial intelligence in the liquidity management problem of commercial banks. His previous work has been on the management of domestic debt and foreign reserves for the Government of Canada.
Mr. Rivadeneyra holds a PhD in Economics from the University of Chicago.
An anonymous token-based central bank digital currency (CBDC) would pose certain security risks to users. These risks arise from how balances are aggregated, from their transactional use and from the competition between suppliers of aggregation solutions.
Improving the conduct of monetary policy is unlikely to be the main motivation for central banks to issue a central bank digital currency (CBDC). While some argue that a CBDC could allow more complex transfer schemes or the ability to break below the zero lower bound, we find these benefits might be small or difficult to realize in practice.
This note analyzes different economic models of a central bank digital currency (CBDC) ecosystem where the central bank chooses different levels of market involvement and usage of policy levers. The analysis suggests that there are trade-offs between the costs to the central bank and its ability to achieve policy goals like universal access.
A well-functioning monetary system is characterized by public and private forms of money that exchange at par as value flows freely between them. A relevant retail public money—whether in the form of cash, a central bank digital currency or both—is a necessary component of such a monetary system.
We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research.
We study the impact of the Bank of Canada’s choice of settlement mechanism in Lynx on participant behaviors, liquidity usage, payment delays and the overall operational efficiency of the new system.
We discuss the competition and innovation arguments for issuing a central bank digital currency (CBDC). A CBDC could be an effective competition policy tool for payments. A CBDC could also support the vibrancy of the digital economy. It could help solve market failures and foster competition and innovation in new digital payments markets.
As part of modernizing its core payments infrastructure, Canada will replace the Large Value Transfer System (LVTS) with a new Real-Time Gross Settlement (RTGS) system called Lynx. An important question for policy-makers is how Lynx should be designed.
This paper presents four blue-sky ideas for lowering the cost of the Government of Canada’s debt without increasing the debt’s risk profile. We argue that each idea would improve the secondary-market liquidity of government debt, thereby increasing the demand for government bonds and thus lowering their cost at issuance.
We present a policy framework for electronic money and payments. The framework poses a set of positive questions related to the areas of responsibility of central banks: payments systems, monetary policy and financial stability. The questions are posed to four broad forms of e-money: privately or publicly issued, and with centralized or decentralized verification of transactions. This framework is intended to help evaluate the trade-offs that central banks face in the decision to issue new forms of e-money.
The author describes the construction of the U.S.-dollar-denominated zero-coupon curve for the supranational asset class from 1995 to 2010. He uses yield data from a crosssection of bonds issued by AAA-rated supranational entities to fit the Svensson (1995) term-structure model.
We develop an algorithm and run it on a hybrid quantum annealing solver to find an ordering of payments that reduces the amount of system liquidity necessary without substantially increasing payment delays.
We demonstrate the ability of reinforcement learning techniques to estimate the best-response functions of banks participating in high-value payments systems—a real-world strategic game of incomplete information.
Digital currencies store balances in anonymous electronic addresses. This paper analyzes the trade-offs between the safety and convenience of aggregating balances in addresses, electronic wallets and banks.
Should a central bank take over the provision of e-money, a circulable electronic liability? We discuss how e-money technology changes the tradeoff between public and private provision, and the tradeoff between e-money and a central bank's existing liabilities like bank notes and reserves.
This paper presents a general equilibrium model with endogenous collateral constraints to study the relationship between financial development and business cycle fluctuations in a cross-section of economies with different sizes of their financial sector.
This article provides an overview of the growth of Canadian-dollar-denominated assets in official foreign reserves. Based on International Monetary Fund data and on internal Bank of Canada analysis, we estimate that the total reserve holdings of Canadian-dollar assets increased from negligible levels before 2008 to around US$200 billion in the third quarter of 2013. We discuss the determinants of this increase, as well as its potential impact on Canadian debt markets, for example, lower yields and therefore reduced financing costs for the Government of Canada, and the possible negative impact on market liquidity.
The Bank of Canada recently developed an asset-liability-matching model to aid in the management of Canada’s foreign exchange reserves. The model allows policy-makers at the Bank and the Department of Finance to analyze asset-allocation and funding-mix decisions by quantifying both the risk-return and liquidity trade-offs for the assets, as well as the risk-cost trade-offs of the funding liabilities.
"Government Bond Clienteles and Yields" (with Jianjian Jin and Jesus Sierra), In Advances in the Practice of Public Investment Management, Palgrave, 2018
"Financial Development, Credit, and Business Cycles" (with Tiago Pinheiro and Marc Teignier), Journal of Money, Credit and Banking, 2017, 49 (7), 1653-1665.
"Monopolies and Economic Growth" (in Spanish) (with Pablo Pena), Gaceta de Economía, Fall 2009.
"An Empirical Analysis of the Law of One Price in Mexico" (in Spanish) (with Marco González-Navarro), Gaceta de Economía, Fall 2004.
"Trade Creation and Trade Diversion of Preferential Agreements: New Estimates for NAFTA" (in Spanish) (with Jose M. Chavez), Gaceta de Economía, Spring 2002.
Work in progress
"Payments System Design Using Reinforcement Learning" (with Ajit Desai, Hand Du and Rod Garratt).
"E-Money and Payments Policy" (with Charles M. Kahn and Russell Wong).
"Intraday Trade Dynamics in Short-term Funding Markets" (with Mark Rempel).
"Foreign Reserves and Tail Risk" (with Jorge Cruz Lopez).
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