White Paper by the Bank of Canada explores a feature of central bank digital currencies (CBDC) called loss recovery. Note how the assumption is that CBDC will have a time expiry meaning the currency held in the CBDC account will have a time limit after which it will no longer be usable or accepted. As CBDC are implemented, it will be interesting to see the development of potential financial and social controls:

• time expiry of a certain amount of currency, effectively implementing a Keynesian-based policy of fostering spending in the economy
• jurisdictional applicability of the currency – in other words the currency may not be usable outside of the jurisdiction, effectively implementing capital and exchange controls
• limits or prohibitions of spending the currency on certain products or services
• climate and social controls on spending behaviors, effectively implementing a social credit control system
• negative interest rates, effectively implementing negative interest rate policies by the central bank and eliminating the potential for bank “runs”
• devaluation of the currency – periodically implemented through coordination with monetary policies or through currency exchanges with other CBDCs, other payment systems or physical cash

Bank of Canada White Paper on CBDC

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