CBDCs for SDGs

“The difficulty lies not so much in developing new ideas as in escaping from old ones.”

- John Maynard Keynes. The General Theory of Employment, Interest and Money. 1926

Hello!

Thank you for taking a look at the presentation slides of my Master’s thesis. Feel free to open and read along the presenter notes down below to get a better understanding of the project. (-:

You can always reach out to me at glenn@lokaltbyraa.no for any questions or comments Best, Glenn Sæstad

An alternative strategic vision for central bank digital currencies and sustainable transitions

CBDCs for SDGs

Diploma project

Glenn Sæstad, Lokalt Byrå

glenn@lokaltbyraa.no

How might central bank digital currencies become a new platform for public sector innovation and sustainable development?

CBDC: central bank digital currencies / digitale sentralbankpenger

Alt. strategic principles

1. Financial efficiency

1. Platform for public innovation

2. One central bank digital currency

2. Diversity of CBDCs

3. Ownership and development in silo

3. Collaboration and roles

4. Technological determinism

4. Cultural innovation

CBDC: central bank digital currencies / digitale

Design examples

Context & insight I

Expert network

CBDC:

Central Bank Digital Currency (CBDC): Electronic money issued by a central bank that is available for use by the general public.

Source: Norges Bank. 2018. Digitale sentralbankpenger

Metaphors

Central bank digital currency as digital alternative to cash

Central bank digital currency as public alternatice to bank account money

Central bank digital currency as national smart currency

Source: Kosse, A., & Mattei, I. (2022). Gaining momentum –Results of the 2021 BIS survey on central bank digital currencies

The central banks

90% of the world’s central banks are exploring CBDC

The Norwegian central bank has investigated CBDC for five years and published four reports.

China and Sweden are in technical test phases. Nigeria and Bahamas has launched.

Why CBDC?

Cash makes up under 2% of Norwegian krones and under 10% of transactions in Norway.

New payment services have and are emerging.

Promote more stability, competition, innovation and efficiency in the financial system

Source: Norges Bank. 2018. Digitale sentralbankpenger

CBDC: central bank digital currencies / digitale sentralbankpenger

What future issues could digital central bank currencies solve?

CBDC: central bank digital currencies / digitale sentralbankpenger

Norges Bank: Private sector needs

Diploma project: Public sector needs

Private sector needs

cf. § 1-3, except in extraordinary situations.

– The Central Bank Act § 1-4. The Central Bank’s Independence

“Norges Bank can not be instructed in its activities according to the law,

CBDCs for the public sector

CBDC: central bank digital currencies / digitale sentralbankpenger Glenn

Sustainable Development Goals Economy Society Biosphere

Source: Azote for Stockholm Resilience Centre, Stockholm University. ‘SDG Wedding Cake’

«Increased innovation in the public sector is one of the government’s main strategies to solve society’s chellenges in the coming years.»

Meld. St. 40. 2020. Goals with meaning – Norway’s plan for reaching the sustainable development goals by 2030

Meld. St. 30. 2019. One innovative public sector – Culture, management and competence

«Modernization and innovation could create needs for new forms of work and collaboration.»

CBDC: central bank digital currencies / digitale sentralbankpenger

central bank digital currencies / digitale

«If it turns out that climate risk indeed poses a significant threat to financial stability, handling this risk would fall within the mandate of the oversight bodies and the central bank.»

NOU 2016:17 Climate risk and the Norwegian Economy

CBDC: central bank digital currencies / digitale sentralbankpenger Glenn Sæstad / CBDCs for SDGs/ 01 / Context and insight

Each «coin» could be unique

Money could be traced

Money could be programmed to perform behaviour

A coin could represent something (token)

Data could be fed into machine learning algorithms

CBDC: central bank digital currencies / digitale sentralbankpenger Glenn Sæstad / CBDCs for SDGs/ 01 / Context and insight /

Each «coin» could be unique

A coin could represent something (token)

Money could be traced Data could be fed into machine learning algorithms

Money could be programmed to perform behaviour

CBDC: central bank digital currencies / digitale sentralbankpenger Glenn Sæstad / CBDCs for

- Levy Economics Institute, formerly Norges Bank, formerly International Monetary Fund

Thorvald Grung Moe

«If the central bank were to develop something as big as CBDC, it should do something more than just support the current system.»

Scope & approach II

How might central bank digital currencies become a new platform for public sector innovation and sustainable development?

Platform: A project or an activity acting as a spring-board for many other prosjects og activities.

CBDC: central bank digital currencies / digitale sentralbankpenger Glenn

Integration

Socio-economic smoothing

Childrens’ sports

Gender equality

Public health

Healthy food after school

Fair Play

Help with home work before play

Figure: Adapted from Hill. 2022 / Photo: Stavanger City Archive Glenn Sæstad / CBDCs for

Integration

Socio-economic smoothing

Gender equality

Public health

Childrens’ sports

Healthy food after school

Help with home work before play Fair Play

Competition

Childrens’ sports

Play matches

Figure: Adapted from Hill. 2022 / Photo: Stavanger City Archive

Photo: The National Library

Strategic design

Strategic design develops services and interfaces informed by policy and society

Interface and user experience

Service and organization

Strategic design researches poliy through interfaces and services

Policy and society

Choice of futures methodology

Transition pathways

Prognoses

Scenario axees

Choice of futures methodology

Transition pathways

Scenario axees Prognoses

Uncertainty

Responsible and fair consumption

Industrial and commercial policy

Local communities and economies

Volunteering as sustainability strategy

«They are interesting ideas, but we would like to have seen you present it more analytically and schematically»

Describe the strategy

«Its not entirely clear to us how the concepts are financed and the money is created.»

Detail user stories

«I don’t really understand the underlying technology.»

Explain back end technology

Expert panel 24. februar

Design delivery III

1. Financial efficiency

1. Platform for public innovation

2. One central bank digital currency

2. Diversity of CBDCs

3. Ownership and development in silo

3. Collaboration and roles

4. Technological determinism

4. Cultural innovation

CBDC: central bank digital currencies / digitale

Alt. strategic principles

1. Financial efficiency

1. Platform for public innovation

Design examples

2. One central bank digital currency

2. Diversity of CBDCs

3. Ownership and development in silo

3. Collaboration and roles

4. Technological determinism

4. Cultural innovation

Design examples

1. Future scenario

2. User story

Example I: Fair consumption /Carbon rations

“Flight miles per capita is declining. But the richest 10% flies more than ever.”

Future scenario

“The jump in carbon taxes is coming soon.”

“- People despair over the price of letting their kids see grandma.”

Carbon rations

→ Carbon rations are transferred equally to all citizens each month

Carbon rations

→ Carbon rations are transferred equally to all citizens each month

→ Carbon rations are a parallel currency used in addition to regular money

→ Carbon rations disappear once used. They do not circulate.

Carbon rations

→ Carbon rations are transferred equally to all citizens each month

→ Carbon rations are a parallel currency used in addition to regular money

→ Carbon rations disappear once used. They do not circulate.

Carbon rations

→ Carbon rations are transferred equally to all citizens each month

→ Carbon rations are a parallel currency used in addition to regular money

→ Carbon rations disappear once used. They do not circulate.

→ Carbon rations are integrated in all payment systems.

Carbon rations

→ Carbon rations are transferred equally to all citizens each month

→ Carbon rations are a parallel currency used in addition to regular money

→ Carbon rations disappear once used. They do not circulate.

→ Carbon rations are integrated in all payment systems.

Carbon rations

→ Carbon rations are transferred equally to all citizens each month

→ Carbon rations are a parallel currency used in addition to regular money

→ Carbon rations disappear once used. They do not circulate.

→ Carbon rations are integrated in all payment systems.

→ Carbon rations are managed through mobile banking apps.

Carbon rations

→ Carbon rations are transferred equally to all citizens each month

→ Carbon rations are a parallel currency used in addition to regular money

→ Carbon rations disappear once used. They do not circulate.

→ Carbon rations are integrated in all payment systems.

→ Carbon rations are managed through mobile banking apps.

Carbon rations

→ Carbon rations are transferred equally to all citizens each month

→ Carbon rations are a parallel currency used in addition to regular money

→ Carbon rations disappear once used. They do not circulate.

→ Carbon rations are integrated in all payment systems.

→ Carbon rations are managed through mobile banking apps.

→ Giving up carbon rations to the government generates a financial reward for voluntarily reducing Norway’s carbon footprint.

Carbon rations

→ Carbon rations are transferred equally to all citizens each month

→ Carbon rations are a parallel currency used in addition to regular money

→ Carbon rations disappear once used. They do not circulate.

→ Carbon rations are integrated in all payment systems.

→ Carbon rations are managed through mobile banking apps.

→ Giving up carbon rations to the government generates a financial reward for voluntarily reducing Norway’s carbon footprint.

Future scenario

“New trend report on the carbon neutral luxury market.”

Example II: Long term economy /Long term contracts

Future scenario

“Digital contracts for sustainable business models.”

“Long-term contracts gives society better and more sustainable products and services. Here governmental bodies can find examples, guides and everything to get started.”

Long term contracts

→ Procurer, supplier and related accounts are connected in a digital contract.

Long term contracts

→ Procurer, supplier and related accounts are connected in a digital contract.

→ Terms are programmed into the money, locking them in procurer’s account and freeing them for suppliers on set milestones.

Long term contracts

→ Procurer, supplier and related accounts are connected in a digital contract.

→ Terms are programmed into the money, locking them in procurer’s account and freeing them for suppliers on set milestones.

→ If the building stops producing value, the contract does not free the rest of the money for the suppliers

Future scenario

“We will make money on this building through 60 years.”

“Security in long-term contracts – this is what your bank needs to know to offer you financing.”

Example III: Local development /Local currency

“Value creation on your local community.”

Local currency

→ Local currencies use geo data to limit use outside a given area.

Local currency

→ Local currencies use geo data to limit use outside a given area.

→ Regular money is exchanged in and works as security for local currency (tokens) on the CDBC platform.

Local currency

→ Local currencies use geo data to limit use outside a given area.

→ Regular money is exchanged in and works as security for local currency (tokens) on the CDBC platform.

→ 5% exchange-in bonus and 10% exchange-out fee incentivizes keeping the currency local.

Local currency

→ Local currencies use geo data to limit use outside a given area.

→ Regular money is exchanged in and works as security for local currency (tokens) on the CDBC platform.

→ 5% exchange-in bonus and 10% exchange-out fee incentivizes keeping the currency local.

Local currency

→ Local currencies use geo data to limit use outside a given area.

→ Regular money is exchanged in and works as security for local currency (tokens) on the CDBC platform.

→ 5% exchange-in bonus and 10% exchange-out fee incentivizes keeping the currency local.

→ Option to pay local taxes in local currency provides a trustworthy use for recieving local currency.

“Success with local orders”

“Our city, our shops, our money!”

Example IV: Public-volunteer collaboration /Volunteer kroner

Future scenario

“The Ministry of Culture and Equity launches a new currency for volunteering”

“Register your organization for volunteer coins.”

Volunteer kroner

→ Reward for participating in organized volunteering

Volunteer kroner

→ Reward for participating in organized volunteering

→ The register documents who did what and for who for verification

Volunteer kroner

→ Reward for participating in organized volunteering

→ The register documents who did what and for who for verification

→ Volunteer Krones are accepted by payment systems of public services. The service provider exchanges received volunteer Krones for regular kroner from the municipality’s community budget.

Volunteer kroner

→ Reward for participating in organized volunteering

→ The register documents who did what and for who for verification

→ Volunteer Krones are accepted by payment systems of public services. The service provider exchanges received volunteer Krones for regular kroner from the municipality’s community budget.

→ Financing of public projects with volunteer kroner releases funding from local development budgets.

→ The municipality can trust that they are funding something many in the community wants.

Volunteer kroner

→ Reward for participating in organized volunteering

→ The register documents who did what and for who for verification

→ Volunteer Krones are accepted by payment systems of public services. The service provider exchanges received volunteer Krones for regular kroner from the municipality’s community budget.

→ Financing of public projects with volunteer kroner releases funding from local development budgets.

→ The municipality can trust that they are funding something many in the community wants.

Volunteer kroner

→ Reward for participating in organized volunteering

→ The register documents who did what and for who for verification

→ Volunteer Krones are accepted by payment systems of public services. The service provider exchanges received volunteer Krones for regular kroner from the municipality’s community budget.

→ Financing of public projects with volunteer kroner releases funding from local development budgets.

→ The municipality can trust that they are funding something many in the community wants.

→ The municipality gets an overview of active community members they can invite as representatives in planning processes.

Fremtidsscenario

“Reducing their hours to volunteer –More important to make a difference than having another jacket.”

“Easing their budget by volunteering.”

Carbon rations

Long term contracts

Local currency

→ CBDC would need to adress several needs to be worth the investement

→ Complex challenges are costly to solve one by one, while public sector budgets will have to shrink

Volunteer kroner

→ Future big public projects should adress several strategic dimensions.

→ CBDC does not have to be one thin: One digital infrastructure could support several variants of central bank digital currency.

→ Programmability and smart contracts enable variants of CBDC on the same platform.

→ None of the examples replaces «normal money»

Carbon rations

Parallel currency for carbon footprint that disappear through transactions.

Long term contracts

Money programmed to follow terms of a contract with a 60 to 100 year horizon.

Local currency

Money with local variation depending on local needs.

Volunteer kroner

Separate money system between public and volunteer sectors.

→ Collaboration with clear roles is the key to move past discussions about central bank independence or not

→ The central bank could own the platform, but let other parts of government decide what to use it for

→ Opening up the platform for other parts of the public sector would generate more value from a CBDC project

Carbon rations

Storting

Government

Long term contracts

Ministry of finance

Ministry of commerce and fishery

Private sector collaborators

Lokale valuta

Ministry of municipalities and rural areas

Municipalities

Local business associations

Frivilligkroner

Ministry of culture and equality

Frivillighet Norge / Volunteering

Norway

Municipalities og KS

→ Central bank digital currencies are more than just a technology with determined outcomes. The outcome of CBDCs depends on the culture and political choices surrounding what society wants money to be.

→ CBDC could drive a public discussion about money and innovation and lower the threshold for change: Multiple currencies might be hard to imagine now, but would be easier to imagine after introducing a general CBDC.

Carbon rations

From «richest gets to pollute» to «no one gets to pollute more than others»

Long term contracts

A sustainable economy needs a long term profit motive

Long term contracts

All kroner are not the same, some have restrictions and advantages.

Volunteer kroner

A more feminist economy valuing volunteer contribution through access to public services.

Value

Deliver on expectations to contribute to sustainable development without loosing integrity to central bank independence.

Stronger argument for launching CBDC as an emergency system.

Platform for new sustainable development policies

A more innovative public sector meeting the needs of citizens

Stable local communities shielded from the worst effects of climate change.

Reception & relevance I V

«This has to be an A»

«I commend you for now going too far out in the [existing] radical direction»

«I think this is new and exciting, but it requires a thorough analysis of how it would effect financial stability, an effective payment system and so on.»

«Volunteer kroner in particular is an examples of a more feminist economy that values work outside of what is paid.»

«This is more a tool for systems change than something incremental.».

Conclusion & reflections V

The project has introduced design into a new context, central banking, and proposed new ideas in the field.

Working broadly in the design phase was needed, but limited detail.

The project proposes a general direction for CBDC that requires further work before deciding on realization.

Alt. strategic prinsiples

Design examples

1. Financial efficiency

1. Platform for public innovation

2. One central bank digital currency

2. Diversity of CBDCs

3. Ownership and development in silo

3. Collaboration and roles

4. Technological determinism

4. Cultural innovation