Digital Money report summary: monetary architecture, CBDC, stablecoins and regulation

Key Takeaways

• Digital money is fundamentally an institutional and policy issue, not merely a technical one. The critical questions concern who creates money, under what safeguards, and how liquidity is preserved during stress.
• Cash is disappearing from daily payments while private digital liabilities expand domestically and internationally, prompting public authorities to reevaluate the role of sovereign money.
• The report addresses three interconnected angles: domestic monetary architecture, the international role of digital money, and regulatory frameworks governing digital currencies.
• Central questions include the social value of private money creation, the case for central bank digital currencies, and implications of cryptocurrencies and stablecoins for the international monetary system.

What This Report Covers

The report, the eighth in IESE's Future of Banking series, examines how digital technology challenges the framework governing money creation. It shifts focus from technological novelty to the institutional arrangements that ensure money remains reliable. The analysis addresses how rents and risks associated with money creation are distributed between public and private entities, and evaluates the regulatory approach to digital currencies and tokenisation across domestic and international contexts.

Why This Matters for Pharmaceutical Operations

For pharmaceutical companies, the relevance is practical and operational. Developments in digital payment infrastructure directly affect supplier payments, cross-border treasury operations, and settlement choices. Regulatory evolution around central bank digital currencies and stablecoins may influence acceptable payment instruments, counterparty risk assessment, and compliance expectations. As monetary systems digitalise, pharma finance teams should monitor regulatory developments and reassess payment rail strategies accordingly.

Frequently Asked Questions

Who creates money in a digital monetary system?

The report identifies this as the central institutional question. Both public authorities (through central bank digital currencies) and private entities (through stablecoins and other private digital liabilities) create money. The distribution of money creation authority between public and private sectors, and the safeguards governing each, fundamentally shape monetary stability.

What role should central bank digital currencies play?

The report examines the case for central bank digital currency but frames it within broader questions about monetary architecture. Rather than treating CBDC as a technological inevitability, the analysis considers whether retail CBDC represents the natural institutional response to digitalisation and changing payment patterns.

How do stablecoins and cryptocurrencies affect the international monetary system?

The report evaluates the macroeconomic effects of cryptocurrencies and stablecoins on international monetary arrangements. It considers implications for currency internationalisation, system fragmentation or integration, and the stability of cross-border payment flows.

What regulatory approaches are most appropriate for digital currencies?

The report examines regulatory frameworks for stablecoins and tokenised assets, comparing different approaches and evaluating how regulation can ensure private digital liabilities function reliably as money while managing systemic risk.