The Impact of Central Bank Digital Currencies on the Banking Sector

David Andolfatto


Here is an interesting podcast by David Andolfatto. About the Impact of Central Bank Digital Currencies on the Banking Sector. He also gave a short summary of his recent paper about Central Bank digital currency, It doesn’t think a lot of Central Banks will be willing to experiment with the notion of issuing, the equivalent of digital cash, just for a lot of regulatory concerns, like knowing your customer requirements or anti-money laundering rules.

The Two payment structure in the US today-

  1. On one hand, you have these big powerful depository institutions, these private banks that have access to and can hold accounts directly with the Federal Reserve Bank. These accounts are interest-bearing accounts. They presently earn a 2% interest. The banks can send money between themselves using Fedwire, which is a real-time gross settlement system. So you can send money instantaneously and there’s like trillions of dollars that flow through this system every day and moreover for the banks, it costs almost nothing to operate this Database Management System. It’s basically free as far as the big banks are concerned.
  2. On the other hand, you have the retail experience. The one that he has to go through or some small business for example. They either have to use cash which is very costly which takes a lot of resources to secure, to transport and to deposit.
    So in contrast to these big banks that pay basically nothing for instantaneous payments, you have the small business person who’s working on very small margins. They have to pay these big interchange fees and the payments don’t clear for two or three days.

His proposal in this paper is to say, what if we combine/permit these regular retail people to have access to interest-bearing Central Bank digital money, where the payments clear instantaneously on a real-time gross settlement system.

He also discussed a few words about Blockchain and shared database system and the idea of a central bank holding reserves in some security like crypto or Bitcoins and Gold.

A more detailed podcast from David Andolfatto on the Epicenter channel is given below:


Low cost (sub-70$ programmable computer) for kids

Spider girl – wanted to play with a computer, seeing both me (dad) and mom working. In fact, when she used an old laptop – she dropped  it.

Laptops and computers  (iphones and ipads ) induce ADHD via screen fixation in kids according to this study.

1. So, I decided not to give her a laptop- she’s all of 5 years old. Similarly, I could not give her the other desktop computer (or an ipad or an old iphone) since she quickly learned to use youtube or other entertainment apps like Netflix or games. These led to screen fixation…

So, I had to find a system that didn’t play video fast enough and was usable for other purposes like learning to read, play music or (possibly) program.. Of course,  as a bonus, one should be able to do other stuff, like add numbers using LEDs  or play colors based on tunes…using LEDs

2. So I got this Raspberry pi with case  I used an old Television (LCD one) and hooked up a HDMI interface with the Raspi.  The HDMI cable costed me 7$.  One can buy a recyclables monitor from your nearest store.

3. Then I connected an old keyboard and an old mouse (total cost about 10$). After that I installed the standard Raspian operating system, which comes inbuilt with several programming languages: Scratch, Python, Mathematica etc.. I showed her how to fix it and run.

4. I showed her how to hook up the raspi to power and it runs just as is.

Scratch was designed by someone at MIT for kids. I showed her how to hook up the Raspi, move the mouse, and type something on the keyboard and Scratch. She figured out the rest, ie. creating loops, motion, adding sounds, making the computer ask questions like  “Whats your name, etc…?” with an input window…

Voice for “device” input

Voice is slowly replacing touch as a medium for device input. However, many common operations  e.g. starting an app , sending an email, replying to a phone call, even answering a phone call  are mostly done through touch.

It dawned on me that if you had voice capabilities on apps – specifically for doing things like reply back or to answer the phone without needing to physically touch the device, or your handset, or the headset it would be so much more convenient.

The “voice out” part of devices, by means of speakers are awesomely developed. The “voice in” is still being developed. I’m pretty sure that over  the next few years, as voice will become the key driver for device I/O it would develop significantly.

The brainwave driven device can wait – instead of leapfrogging “Voice” that sound waves as the primary interface to devices.

Overall, I think the human – device interface will progress from keyboard/mouse/IO peripheral -> touch -> voice ->brainwave…..