Piero Cipollone: Money in the Digital Age

Why It Matters

Central bank money remains the anchor of monetary stability; its digital adaptation is essential to prevent market fragmentation and preserve confidence in the financial system.

Key Takeaways

• Central banks historically issue stable, trusted money.
• Digital payments now dominate consumer transactions.
• Failure to digitize central bank money risks relevance loss.
• Policy calls for extending central bank money into digital infrastructure.
• Safety, uniformity, and reliability must remain core attributes.

Pulse Analysis

The rise of digital payments has accelerated dramatically over the past decade, driven by mobile wallets, real‑time settlement rails, and a wave of fintech innovators. Consumers expect instant, frictionless transactions, while businesses demand transparent, low‑cost settlement solutions. In this environment, traditional cash and legacy bank deposits are losing ground, prompting central banks worldwide to explore how their sovereign currency can function within these new channels without sacrificing its fundamental attributes.

If central banks cling to legacy infrastructures, they risk marginalising public money in sectors where private‑sector stablecoins or tokenised assets dominate. Such a gap could create parallel monetary ecosystems, heightening fragmentation and potentially destabilising the broader financial system. Historical precedents show that when official money loses relevance, confidence erodes, leading to higher volatility and reduced effectiveness of monetary policy. Moreover, the lack of a public digital anchor could amplify regulatory arbitrage, as private actors fill the void with varying standards of security and consumer protection.

The recommended policy response is not to halt digitalisation but to proactively embed central bank money into the evolving technological landscape. This involves developing interoperable digital currency platforms, collaborating with private‑sector payment networks, and ensuring that any digital extension retains the core pillars of safety, uniformity, and reliability. The Bank for International Settlements (BIS) and other multilateral bodies are already outlining frameworks for central bank digital currencies (CBDCs) that balance innovation with systemic resilience. By embracing digital infrastructure, central banks can reinforce their role as the ultimate guarantor of monetary stability while supporting the modern economy’s demand for speed and accessibility.