Core Focus: The identification of a new monetary policy channel—the “CBDC valuation/remuneration channel”—through which CBDC affects the value of money and the transmission of policy.

In-Depth Notes:
Recent theoretical research has identified a fundamentally new channel for monetary policy transmission, termed the “CBDC valuation/remuneration channel.” This channel emerges from the unique properties of CBDC as a digital liability of the central bank that can be remunerated, unlike physical cash. The preference for CBDC plays an essential role in shaping the value of CBDC and determining the transmission of monetary policy .

The Distinctiveness of the CBDC Valuation Channel:
The CBDC valuation channel is distinct from traditional monetary policy channels because it operates through the direct effect of CBDC remuneration on the value of money itself. Unlike conventional interest rate policy, which affects the economy through borrowing costs and credit conditions, the CBDC channel works through the substitution effect between CBDC and other monetary assets. The research represents the first attempt at systematically examining potential disparities in valuation that could materialize between the physical and digital currencies issued by a single central bank . This valuation differential may primarily emanate from the diverse pricing strategies adopted by goods producers for physical and digital currency payments.

CBDC as a Distinct Monetary Instrument:
The remuneration of CBDC creates a new policy tool that is distinct from the interest rate on reserves. Research has shown that in a world with an imperfectly competitive deposit market, the central bank can boost lending and hence output by increasing the CBDC rate while keeping the reserve rate constant or even reducing it . This is because CBDC is a perfect substitute for deposits as an electronic means of payment, so the bank is forced to match the CBDC rate one for one, whereas banks do not fully pass the increase in the reserve rate to depositors when they have market power. This creates a non-redundant use of the reserve rate and the remuneration rate of CBDC.

The “New Monetary Order” Concept:
The introduction of CBDC has been described as potentially creating a “New Monetary Order” . This reflects the potential for CBDC to fundamentally alter the structure of monetary policy transmission. While the idea of an independent CBDC remuneration tool may seem like an over-engineering of monetary policy, it reflects the broader trend of central banks acquiring new instruments to address contemporary challenges . The historical parallel with active changes to reserve requirement ratios—which were subsequently given up for the sake of a simpler, more transparent, and equally effective monetary policy implementation—illustrates the tension between instrument proliferation and operational simplicity .