Ant can reach 400m customers outside China through its partners. But the problem with abstaining from creating CBDCs is that network effects do not stop at national or currency boundaries. To some observers, it might seem better if central bankers in democratic, capitalist countries eschew this thicket of problems altogether. CBDCs may risk empowering authoritarians, but in democratic countries there is usually adequate separation of powers within government to stop this. They should not pay interest and the value of their balances should perhaps be capped. This may mean constraining the scope of CBDCs and managing them at arm’s length from the central bank-perhaps through third parties. The best defence against the unhealthy spreading of state influence over lending decisions is to keep the current fractional-reserve system alive. Yet there should be ways to minimise each of these problems. And the concentration of the economy in digital money, whether it is run by private firms or by a central bank, could provide a new route for malicious actors to destabilise systems through cyberwarfare. The digital involvement of the central bank in everyday transactions would not only increase the risk of such interference but also be a gift to those wishing to snoop on citizens. As people move their money into CBDCs they will pull it out of banks, threatening the system developed to foster loans without overt state interference in credit allocation. Many of the issues it raises are as tricky as the financial stability and inclusion problems of old. The roll-out of what amounts to a new monetary system thus comes with risks. In China, where payments firms are most advanced, more than 100,000 people are already using a digital yuan in pilot projects. So have efforts to create central-bank digital currencies, a digital form of paper cash to compete with the digital payments of private giants. Projects to accelerate fast payment systems have cropped up worldwide. As more activity migrates away from banks, existing monetary-policy mechanisms may become obsolete.The risk of losing control over the monetary system has lit a fire underneath usually staid central bankers. Because they benefit from network effects, payment platforms will tend to concentrate into just one or two giant intermediaries. But this revolution brings with it new problems.

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