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Home | Events Archive | Best Before? Expiring Central Bank Digital Currency and Loss Recovery
Seminar

Best Before? Expiring Central Bank Digital Currency and Loss Recovery


  • Location
    Tinbergen Institute Amsterdam, room 1.01
    Amsterdam
  • Date and time

    July 06, 2022
    12:45 - 14:00

Abstract
An important feature of physical cash payments is their resilience—they do not require electrical power or network coverage. Many central banks are exploring issuing digital cash products with similar offline payment functionality.

An inconvenient aspect of physical cash is that it can be lost, and there is no way to recover it. We consider a potential feature to solve this problem for offline digital cash: an expiry date to automate personal loss recovery. With this feature enabled, digital cash could not be spent after its expiry date. Consumers whose digital cash expired would automatically receive the funds back into their online account without having to file a claim.

We show that offering the option of personal loss recovery could substantially increase consumer demand for digital cash. However, the length of time to expiry plays a key role. An expiry date that is too soon is inconvenient, but a date too far in the future slows down the reimbursement of lost digital cash.

Access the full paper here.