The suggested shift to a retail CBDC model involving digital money transfers to the corporate and personal (individual citizens) sectors will represent a crucial change in the monetary architecture serving retail payments and savings. The various monetary, financial, economic and legal implications of the approaches being explored for the potential issuance of CBDCs – some elements of which are being explored in the approaches taken in the various CBDC projects – will therefore need to be addressed.

The potential use of CBDCs in cross-border financial transfers will need to be examined by exploring the involvement of central banks’ RTGS systems proposed use in this area, including how central banks are experimenting with its extension via wholesale CBDC structures, in a multi-currency environment in order to secure stability, security and control over a key element of the global financial and trading system (BIS 2022a).

The contentious possibility, raised by some commentators (Zellweger-Gutknecht 2021) of introducing monetary action aimed at directly controlling consumer expenditure will be discussed, in the context of the current complex of conventional, and what are now considered “unconventional”, monetary policy instruments.

The importance of central bank money (fiat) money to the whole monetary system is difficult to overstate: it provides the central trust-anchor for the banking system and underpins the trust that citizens have in their currencies. Unless regulated, stablecoins, as a new digital source of private money, pose a potential threat to this fundamental role of the central bank. Although, private money exists in the current monetary system and is ubiquitous as commercial bank money, used by businesses and by the general public, its role is uniquely supported by the central bank. Commercial bank private money (in the form of deposits matching commercial bank loans, as assets), is matched one-to-one by the parallel reserves, created as liabilities at the central bank. These reserves are public money and serve to guarantee the private money created by the commercial banks. Unregulated stablecoins, on the other hand, are tied to the value of the various fiat currencies, but they are not matched by public money created by the relevant central banks as reserves. Neither are they able to provide the trusted settlement and clearing system offered by a well-performing central bank, utilizing the provision of a universally-accepted unit of account.

The nature and use of money in the economy and in society are essential aspects of how we live and work. Mostly, the structures that support the functions of money lie in the background of our lives, and we are largely unaware of the architecture underpinning the fundamental trust on which the provision and use of money depends. The private money in the UK issued by commercial banks, that we use in all our financial transactions, is necessarily anchored by the public guarantee of the Bank of England. This guarantee is only noticeable in a crisis (such as the run on the Northern Rock bank in 2008). The guarantee is necessary because for each loan and matching deposit issued by a commercial bank, there is a matching reserve at the central bank. The public money issued by the central bank in fiat money is the guaranteed numerical unit of account against which all other commodities may be valued. The unit of account is the bedrock of the economy. Whatever changes of the structure of the monetary system, the role of the central bank in providing this essential trust-anchor within monetary jurisdictions is essential to the continuous stability and trustworthiness of money. The lack of a corresponding role at global level is a gap that will eventually need to be filled rather than relying on any one national currency.

The proposed issuance of digital money directly to the general public (and to non-financial businesses) on demand, via retail CBDCs, should increase awareness of the financial and monetary architecture upon which the accepted provision and use of money depends. In the developed economies, the retail CBDC models likely to be adopted may not alter greatly the public's perception of the introduction of digital money as being from the central bank. Insofar as the digital money is likely to be in the “custodianship” of the commercial bank or financial intermediary, then the monetary architecture will remain obscured. Nonetheless, the digital money will be, as is cash, public money, issued with a direct claim on the central bank for its redemption. Indeed, if the indirect retail CBDC model is deployed then this position is further obscured in that the customer of the commercial bank will, as now with private money, have their claim for redemption made on the commercial bank, even though the CBDC digital money will be, strictly, public money.

The development of stablecoins and their use in cross-border financial transfers has the potential to pose a threat to global financial stability. The global financial system is inherently unstable, reflecting the increasing dysfunction of the Bretton Woods global trade and finance settlement that was based on the US dollar as the principal global medium of exchange, store of value and unit of account. The deterioration in the effectiveness of this global system is being accelerated by the shift in global trade, consumption and economic growth towards the Asia-Pacific supra-region accompanied by the growing inadequacy of stable global financial reserves (SDRs) owned and managed by the IMF.

It seems likely that, unless central banks collaborate internationally in opening up the possibilities for the introduction of retail and wholesale CBDCs, then unintended negative consequences may occur. For example, if Sweden – the “first mover” among EU countries (albeit they may not now be the first to issue a CBDC) – introduced a digital krona, then its use could leak across Nordic countries. China has already suggested that their e-CNY might be used for regional trade transactions between China, Japan, South Korea and Hong Kong. The advent of China's exploration of cross-border retail and wholesale CBDCs has been linked to concern about the potential of extension of e-CNY for wider international payments. Some US commentators have expressed fears of its challenge to the dollar as a reserve currency. The Bank of International Settlements is considering all these issues. The significant emphasis placed on the use of CBDCs by the BIS in relation to cross-border payments related to trade, tourism and capital movements is indicative of the concern exhibited by central banks about the use of unregulated stablecoins for international payments. The various central bank CBDC activities could be regarded as a precursor to the eventual adoption of a global reserve digital currency. A move the US will be likely to strongly resist, despite the use of the dollar as the main reserve currency being a mixed blessing, as Barry Eichengreen (2017) and other economists have pointed out. This explains some of the resistance to CBDCs among US financial institutions and economists.

The database technologies available for CBDCs are either centralized, decentralized, or semi-decentralized databases. The use of distributed ledger technology (DLT), or a “bespoke” version of blockchain, which maintains a measure of centralized control by the central bank, are the main options for both retail and wholesale CBDCs. The issue for central banks will be whether the financial data of a distributed group of participants can be collectively and safely maintained, without internal system reliance on a single central party or a centralized data store. Whatever variant of CBDC is selected, it must offer scalability, confidentiality/privacy, availability/latency and security/resilience.

There are four technology decisions, all relating to the potential design model choices to be made by central banks for both retail CBDCs and wholesale CBDCs. First, the choice between a central ledger database technology (the current position) versus a decentralized, distributed database technology. Second, should a fully decentralized database technology prove too problematic for central banks, is a semi-decentralized approach practical and how exactly does this choice involve DLT/blockchain technology? Third, how do the database choices relate to the use-cases for wholesale CBDCs for cross-border applications and the available retail CBDC model design options? Finally, how best to establish interoperability between differing database approaches and maintain technological innovation over time.

Central vs decentralized databases

As far as retail CBDCs are concerned the decision has yet to be made, although it seems likely that DLT, in some format, will be used for establishing retail CBDCs, albeit often under an API. Scalability is a key issue for retail CBDCs, whereas wholesale CBDCs when used for cross-border transfers involve a smaller number of participants on the network.

Traditionally, central bank databases have been centralized. Network centralization developed, historically, as a means to improve efficiency and take advantage of potential economies of scale. On the other hand, decentralization seeks to improve the speed and flexibility of networks by decentralizing computer processing across the network to the individual user (Brookings 2020).

Centralized ledgers, as used by central banks in the current monetary system architecture, provide a complete overview of wholesale transactions, demands for which they receive from commercial banks for clearance and settlement, using the movement of reserves to do so. Given the crucial role of central banks in maintaining trust in the monetary system, having centralized control of the ledger is a convenient and secure way of maintaining that trust-anchor role.

China

China's interest in potentially establishing a CBDC began in 2014 when a study of retail digital money was initiated by the People's Bank of China (Higgins 2016). In 2017, China's State Council approved the PBOC's proposal, in cooperation with commercial banks, to design the CBDC. This work was done by a Digital Currency Research Institute under the aegis of the PBOC and its aim is to design a digital currency electronic payment (DCEP) system that will function much like a digital form of cash. For retail payments it will operate principally through smartphones.

At the end of 2017, on the approval of the State Council, the PBOC began to work with commercial institutions in developing and testing digital fiat currency (hereinafter referred to as e-CNY, a provisional abbreviation following international practice). In May 2019, PBOC governor Yi Gang stated that “top-level design” of e-CNY had already been completed and announced that initial pilot projects would take place in Chengdu, Shenzhen, Suzhou and Xiong’an (Lloyd & Savic 2021). In Suzhou, for example, some government workers were told to download an e-CNY digital wallet app. In May 2020, government workers in Suzhou began to be paid portions of a transportation subsidy via DCEP (Fathi 2022).

The general concern for the PBOC, along with other central banks at the time, was that the introduction of a sizeable, global, private payments digital currency, such as Diem, could eventually mean that they might lose control over the issuance of their currency, including cash, as a medium of exchange. China has experienced a substantial move to cashless payments, which has meant that individuals have been losing direct access (because of the increasing dominance of Alipay and Tencent payment applications) to the cash renminbi as China's currency. The introduction of a CBDC would not only resolve this problem, but monetary policy could be, if desired, directly transmitted to the general public (BIS 2021).

According to the PBOC's own survey conducted in 2019 (PBOC 2021b), mobile payments accounted for 66 per cent of all transactions and 59 per cent of the total value, whereas those paid in cash accounted for 23 per cent and 16 per cent, and those paid by card 7 per cent and 23 per cent, respectively.

Thailand

In 2018 the Bank of Thailand (BoT) launched its first CBDC project (Bank of Thailand 2019): a proof of concept (Inthanon Project) for a Corda DLT-based project for wholesale domestic and cross-border funds transfer using central bank digital currency. A second project, which will only be discussed here in passing, was for a DLT scripless bond project, an initiative to increase efficiency for saving bond registration and sales processes.

The project reported success in three key areas which demonstrated the potential for a DLT system. Firstly, the system was able to handle both tokenized cash and bonds, that is two separate asset classes. Secondly, it had the ability to create and exchange tokens simultaneously, avoiding the necessity for intermediaries. Thirdly, banks were able to settle in cash tokens around the clock and facilitate business when closed.

Other issues considered provided mixed evidence and a need in some operations to adjust the system functionality. For example, achieving settlement finality, which is a necessary condition of payment systems, including RTGS systems, meant the BoT running a single “notary” node to achieve consensus on the final settlement of transactions.

Another important issue examined was privacy, especially privacy for transactions. Essentially, the Corda “blockchain approach” identifies only a transaction identifier of the tokens exchanged so that the central bank, or other qualified nodal participants (namely banks), are not able to have information on the token amounts, the sender, the recipient or the asset type, only that the token(s) have been spent and the transaction irrevocably concluded.

Resiliency, of both the data involved and the network itself was tested. Although generally, DLT-based systems offer high resilience against data failures at any specific node, because each node can request copies of data from other nodes. In the project, privacy issues meant that this was not permissible. Instead, specific control points were established that automatically saved the relevant transaction data.

In terms of network resilience, it was found that in bilateral transfers, if the notary node failed the specific transaction involved could not be settled, but other nodes worked. In terms of automatic liquidity provision (ALP) – a key component of central bank action to provide liquidity to banks running short of cash reserves in RTGS systems – both the notary node and the separate BoT node were critical in ensuring network resilience, failure of either would be inimical to the adequate functioning of the system.

The introduction of CBDCs is likely to have significant impacts on customers’ use of both current and deposit accounts at commercial banks whichever of the four model design variants is implemented. The BIS “recommendation” of an intermediation model would preserve much of the current role of the commercial banks, as would the indirect model, albeit at the potential risk of losing some of the CBDC's wider benefits. Criticism has been levied at the current commercial banking system and structure and the need for reform (see RSA 2020; Lloyd 2021). Moreover, in a speech in 2021, Sir Jon Cunliffe, Deputy Governor of the Bank of England stated that “It is not the responsibility of financial stability authorities to preserve any particular business models, including in banking” (Cunliffe 2021a).

However, CBDCs are not being introduced into a monetary system where commercial banks have an effective monopoly position. Indeed, one of the reasons given for the potential introduction of CBDCs is the increasing provision of competing peer-to-peer internet-based financial payment systems, now accompanied by the introduction of stablecoins and the concerns they raise as providing competing private money channels in relation to Forex (foreign exchange transactions) and cross-border securities exchange. What appears to be clear, at this stage, is that the extent of loan creation via existing alternative finance (AFI) from payment service providers – including fintech providers such as Funding Circle – despite growing strongly, still only represents around 10 per cent of total lending in the UK (CCAF 2021).

Commercial banking: business model and existing digital money

Banks run a complicated business model, serving multiple, interrelated functions including everyday banking, loans and payments. So far, they have not been unduly disturbed by internet-based payment systems, and the share of the payments market by alternative finance provision has not been large. However, stablecoins and the potential involvement of Big Tech, may shake the complacency of the banks (Lloyd 2021). The banks’ position is bolstered by their access to very large client bases and the provision of a range of relatively low cost, but also low unit-profit services, such as account administration, distribution and payment transfers.

Money is almost as old as human civilization. All monetary tokens, bank notes for example, are a form of “IOU”, expressing a social relation between creditor and debtor (Ingham 2004; Dodd 2014). The historical forms which money has taken have varied and the concept itself has been studied across many scientific and philosophical disciplines. The role and allocation of money in the multifarious forms of social, cultural, economic and political organization has always been crucial in influencing the structures and functioning of those organizational and societal forms.

It is broadly accepted, from historical and anthropological studies (Gayer 1937), that fiat money arose by the state issuing credit-tokens which were used by the state to purchase goods and services (including the military means to fight wars) and the state issued those credit-tokens in payment of taxes by citizens. In this manner the state's public monetary sphere subsumed the existing private credit networks, providing a guaranteed monetary anchor.

Money is not a physical object, but rather a system of recording account settlements denoted in a common notional unit of account. Money is not a commodity, whether it is physical money (cash) or digital money.

Luigi Einaudi (Gayer 1937: 265) indicates the historical evidence:

This account indicates the irrelevance of a “commodity-based” money and the necessity of having a “unit of account” based monetary system.

The cryptocurrency Bitcoin affords a modern demonstration of the inherent paradox in commodity-based money. It has a strictly controlled chain in supply (via hash-mining) and a maximum limit on creation over time (21 million coins).

Central banks are actively involved in the research, development and piloting of retail digital currencies. The factors stimulating this active interest are several: (1) the decreasing use of cash for transaction purposes, especially in developed countries; (2) the increasing use of smartphone utilization in developed countries; (3) the absence, in less developed countries, of wide access to formal banking arrangements combined with the widespread availability of smartphones; (4) the availability of emerging digital information and communications technologies, driving a global digital age; and (5) a potential enhanced ability to target central bank monetary policy directly at individual consumer spending. There is also an urgency for central banks to explore wholesale cross-border CBDCs, given central banks’ desire to maintain international financial stability. These various concerns are seen by central banks, and by governments, as requiring a defence of fiat currencies, the crucial trust-anchor role of central banks, and monetary/financial stability, within monetary jurisdictions (BIS 2021).

Central banks are especially concerned with the problems and risks associated with private international cross-border payments, and the opportunities presented for establishing wholesale CBDCs for cross-border financial transfers. Currently some 92 central banks around the world are participating in the various worldwide projects. For example, an April 2021 stock-take of central bank research and design efforts finds that out of 47 current retail CBDC projects, 11 are in addition exploring or piloting single national currency and multi-currency wholesale CBDCs in cross-border environments (Auer & Böhme 2021). Some jurisdictions such as The Bahamas, Nigeria and China, have launched their CBDCs. The cross-border dimension is being taken seriously by the G20 Road Map (FSB 2022) and being followed up by the BIS, given the potential for global trade instability of an extended use of stable-coins for this purpose. Several of these cross-border projects are discussed throughout this book and are detailed in the Appendices.

The salient features of the current monetary payments scene as it is evolving in digital forms are also explored, including the limited regulatory response of the state in most countries, and the general response of central banks, with several examples of CBDC approaches, within and across jurisdictions.

This chapter examines friendship terms (e.g. phile, beltiste, daimonie) in Plato in the light of Brown and Levinson’s face-threat theory of politeness. It argues that every friendship term in Plato is polite redress for a specific face-threatening act, and aims to explain not only their general significance but also why they occur exactly when they do. The chapter examines Phaedrus in detail in order to show how friendship terms are associated with particular face-threatening acts, and supports the argument with a selection of passages from other dialogues. About 240 out of the 457 friendship terms in the corpus are either discussed in detail or explicitly linked to a specific face-threatening act, and the remaining examples should be readily intelligible in the light of this. Friendship terms are formally polite, in keeping with Socrates’ persona as represented in the dialogues, but also serve to emphasize face-threatening acts such as criticism and refutation. It is notable that there are no friendship terms in dialogues, or sections of dialogues, where overt face threat is avoided (e.g. the conversation with Gorgias in Gorgias).

Localities in the interior of South Africa, such as Taung and Vaal River sites, were intensively researched after hominins were discovered (Péringuey, 1911; Dart, 1925a; Goodwin, 1928), but then neglected for the fossil-rich, dolomitic breccia sites in Gauteng Province (e.g., Cooke, 1963, 1967; Vrba, 1976; Brain, 1981, Brain and Sillen, 1988; Bamford, 1999; Pickering and Kramers, 2010; Herries and Shaw, 2011; Reynolds et al., 2011; Lee-Thorp and Sponheimer, 2013). Recently, knowledge of the interior region has increased, following excavations at Florisbad (Brink, 1988; Kuman et al., 1999; Toffolo et al., 2015), Taung, including Equus Cave (Scott, 1987; Klein et al., 1991; McKee and Tobias, 1994; Lee-Thorp and Beaumont, 1995; Johnson et al., 1997; Hopley et al., 2013; McKee, 2016), Canteen Kopje (Beaumont, 1990, 2004; McNabb and Beaumont, 2011; Smith et al., 2012; Lotter et al., 2016), Pniel (Beaumont, 1990; Kunneriath and Gaillard, 2010; Hutson, 2018), Erfkroon (Churchill et al., 2000a; Brink et al., 2015a), Bundu Farm (Kiberd, 2006; Hutson, 2018), Cornelia (Brink et al., 2012; Toffolo et al., 2019) and the Kathu Complex (Porat et al., 2010; Wilkins and Chazan, 2012; Wilkins et al., 2012; Walker et al., 2014; Lukich et al., 2019, 2020).