Benoît Cœuré On Central Bank Digital Currencies And The Future Of Monetary Policy

Episode Summary

Executive Summary: This episode centers on central bank digital currencies (CBDCs), explaining what they are, why central banks are exploring them, and the trade-offs they create. Benoit Coeuré argues CBDCs are less a technical project than a political choice about public money, privacy, bank stability, monetary policy, and whether central banks should maintain a direct relationship with citizens as cash use declines.

Main Topics: What CBDCs are and why they matter (Priority: 5/5): Coeuré defines CBDCs as digital liabilities of the central bank, distinct from commercial bank deposits, payment apps, and bank reserves. He frames them as either retail CBDC for citizens or wholesale CBDC for financial infrastructure. The political purpose of public money (Priority: 5/5): He argues the core question is not technology but whether societies want all everyday money to be commercial-bank money or want central bank money to remain part of the system for trust and public accountability. Banking system stability and financial intermediation (Priority: 5/5): A major concern is avoiding a CBDC design that drains deposits from banks or turns banks into mere conduits. Coeuré emphasizes preserving the role of commercial banks in credit creation and maturity transformation. Privacy, AML/CFT, and the role of regulation (Priority: 4/5): The conversation explores whether CBDCs can preserve cash-like privacy while still supporting anti-money-laundering and counter-terror-financing rules. Coeuré says the balance should be set politically, not by central bankers alone. Stablecoins and private payment systems (Priority: 4/5): Coeuré distinguishes stablecoins from currencies, calling them private payment systems that may be useful if properly regulated but raise systemic and cross-border risks, especially when global scale is involved. CBDCs, monetary policy, and future central bank tools (Priority: 4/5): The discussion covers whether CBDCs could improve monetary policy transmission, enable granular distribution of money, or even support negative rates. Coeuré says central banks are still deciding how much to use CBDCs for policy versus neutrality. Broader macro policy and the post-crisis environment (Priority: 3/5): The interview broadens to fiscal-monetary coordination, low-rate environments, uncertainty from the pandemic, and whether central banks need more flexibility and better complementarity with fiscal authorities.

Key Arguments: CBDCs are central bank liabilities in digital form, unlike commercial bank deposits or payment-platform balances. The main rationale for CBDCs is preserving access to public money if cash disappears and maintaining central bank money at the core of the financial system. CBDC design should not undermine commercial banks, because banks are essential for credit intermediation and financial stability. Privacy versus AML/CFT is a societal trade-off; central banks should not decide it alone. Stablecoins are better understood as private payment systems than as true currencies, and they introduce new systemic and international risks. Monetary-policy use of CBDCs is an open question; central banks differ on whether CBDCs should be policy-neutral or actively used as a tool. The current macro environment favors maximum flexibility and stronger coordination between fiscal and monetary policy. Central banks need to communicate inflation and policy in ways ordinary people can understand, not just through aggregate statistics and market channels.

Data Points: Share of money already digital: More than 90% to 95% - Coeuré notes that most money is already digital, which is why CBDCs are about central bank digital money specifically, not digitization in general. Episode format for Stock Movers: Five minutes or less - Promotional intro describing Bloomberg's Stock Movers audio reports. ECB board tenure: 2011 to 2019 - Coeuré is introduced as a former ECB board member serving during this period. BIS Innovation Hub report: Seven central banks plus the BIS - Coeuré references a report on CBDCs produced by a task force involving seven central banks and the BIS. Household perception of inflation: About 9% annual inflation - He cites a European Commission survey showing households perceived inflation far above the actual rate during 2004-2015.

Pivotal Quotes: "CBDC is money that is issued by the central bank, meaning it's a liability of the central bank." — Benoit Coeuré: He defines CBDCs at the start of the interview to distinguish them from commercial bank money and payment apps. "The key question here is: are we satisfied if all money used by citizens for their daily transactions is commercial money?" — Benoit Coeuré: He frames CBDCs as a political decision about whether public money should remain accessible to citizens. "If monetary policy remains a conversation between central banks and capital markets, then we shouldn't be surprised if people don't trust us." — Benoit Coeuré: He argues CBDCs could reconnect central banks with the public rather than only with financial markets.

Implications: CBDCs may reshape payments, privacy, and bank funding, but their design will be decided politically. The bigger issue is whether central banks can preserve public trust and monetary stability as cash declines and digital finance expands.