Transition from central bank currency to government currency
- Soft landing from currency issuance to borrowing to currency issuance without debt -
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Summary
- A summary
In the central bank currency economy, currency issuance and fiscal expenditure depend on the issuance of government bonds, and currency issuance is a mechanism that involves debt.
In the transition to the government currency economy, the government will issue currency and reduce dependence on government bonds to move to currency issuance that does not involve debt.
This transition will proceed with the management subject and accounting rules as before.
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- Basic principles of transition
• The management subject does not change
• The accounting and supervision system of central banks, the Ministry of Finance, etc. remains the same as before
• Accounting rules will not change
• Budget execution, auditing, report preparation, etc. also follow conventional rules
• Only the publisher will change
• Bond issuer: Central Bank → Government
• Currency issuer: Central bank currency (CBDC, banknotes) → Government currency (government banknotes, stablecoins)
• Direction of transition
• Currency is gradually transitioning from central bank currency to government currency
• No two-way exchange, and the transition is limited to the direction of government currency
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- Transition steps (bulla]
• Step 1: Introduce government currency to the market (a small amount at the beginning)
• Step 2: Gradually reduce the ratio of central bank currency
• Step 3: Increase the ratio of government currency
• Step 4: Minimize the central bank currency and fully transition to the government currency economy
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- Characteristics of transition
• Safety: System confusion is minimized to maintain management subjects and accounting rules
• Flexibility: Financial expenditure and credit creation are possible mainly in government currency
• Value stability: At the beginning of the transition, the value of central bank currency and government currency is gradually linked
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- Conclusion
The transition from central bank currency to government currency is a process in which the management entity and accounting rules remain the same, and only the issuer is replaced.
This transition allows you to safely transition from the traditional issuance of currency with debt to the issuance of government currency without debt.
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Based on this content, it will be easier to understand as a white paper by creating a step-by-step flow diagram + peg relationship diagram.
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