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This Article on central bank digital currencies is motivated by a parable, The Orkney Slew, which is set in an archipelago. Based on the parable, we point out a significant economic market failure that exists in the cross-border payments realm. The analysis then focuses on real-world examples and the national security concerns, including for Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT) and the continued efficacy of U.S. sanctions, associated with the rapidly evolving digital payments landscape.

Many central banks around the world are now cooperatively experimenting with cross-border interoperability of digital currencies. These efforts are driven by the idea of building a global network—an infrastructure—to improve global supply chains and large value cross-border payments, as well as to mitigate national security concerns. While we do not believe that such an infrastructure is necessary at this moment, we do argue that cross-border experimentation is necessary.


Published by the Harvard National Security Law Journal, Vol. 14 (2022). Originally published as Zhang, Jeffery Yufeng and Gary B. Gorton. "The Orkney Slew and Central Bank Digital Currencies." Harvard National Security Journal 14 (2022): 1-48.