How to account for sovereign central-bank money
using a currency register
"Double-entry bookkeeping ... is among the finest inventions of the human mind." This does not come from John D. Rockefeller, or a Rothschild, or Jakob Fugger, but rather from Johann Wolfgang von Goethe. In any case, accounting and bookkeeping are fundamental to the monetary and banking system. A modern credit institute is essentially little more than a large bookkeeping and accounting operation. This then also raises the question of how to properly record and account for sovereign money on the balance sheets of central banks and banks.
The first and actually not so good idea was to continue the practice of entering money into the books as a liability of the money creator. A better idea then was to treat sovereign money like coin, that is, as a liquid asset only, which adds to the equity rather than to liabilities. But the coin or equity approach still has its little drawbacks – which can be overcome by an extension of the equity approach as suggested in the following paper on >
Some basic ideas on the matter in a nutshell >
Overcoming the present inconsistency in accounting for coins, notes and reserves (or, respectively, future CBDC) on the central banks' balance sheets requires three fundamental facts to be acknowledged:
1. A central bank today is not a bank like any other, but a nation's or currency area's monetary authority that creates base money, or legal tender, respectively, basically at its own discretion.
2. A central bank today issues its legal tender to banks by way of crediting bank accounts against collateral, or by purchasing securities at the open market; however...
... the money credited and the credit contract are two different things that need to be understood sui generis and hence would have to be registered separately. The central-bank money in whatever solid or informational form consists of monetary tokens. By its very nature such a token is a monetary asset only, neither a claim on someone nor a liability to whosoever.
Accordingly, a central bank's issuance of money would have to be accounted for as an asset swap: the money tokens swapped for a claim on the debtor to pay interest and repay the principal.
3. Within the present framework of central-bank accountancy, the above reality can hardly be represented in a consistent way. The crux of the matter is how to enter newly created monetary assets on a central bank's balance sheet without either conjuring the money out of a hat or distorting the notions of credit and liability, or overstretching the notion of equity.
The answer to the problem was basically already given by David Ricardo: separating a money creation unit of the monetary authority from its banking unit. Following the advice, the British Bank Charter Act of 1844 subdivided the Bank of England into a Note Issue Department and a Banking Department. That subdivision persists to the present day, but is now of little relevance because cash is hardly ever used in interbank transactions based on central-bank reserves, and has largely been sidelined by bank deposit money in retail banking.
Here is a 6 pages paper on the matter that served as an input to a workshop of the Alliance for Just Money in 2022:
How to account for sovereign central-bank money >
Central-bank money as
a new type of equity
Different from the Ricardo approach of accounting for currency creation as a matter separate from operational central banking (left-hand column), several authors (right-hand column here below) have developed the idea to account for newly created central-bank money as a special type of equity – definitely not a liability of the issuing central bank, but not a conventional form of capital either, instead a new subcategory of equity, which they call "cash equity" (Bossone/Costa), or "social equity" (Kumhof et al.).
• Biagio Bossone & Massimo Costa: Money for the Issuer: Liability or Equity? Economics 2021, 15: 43-59.
• Biagio Bossone & Massimo Costa: Time to Rethink Central Bank Money, World Bank Blogs,
- Part I January 08, 2026
- Part II January 09, 2026
• Kumhof, Michael et al. (Allen, Jason & Bateman, Will & Lastra, Rosa & Gleeson, Simon & Omarova, Saule), 2020. "Central Bank Money: Liability, Asset, or Equity of the Nation?," Cornell Law School, 5 August 2020.
Other approaches prior to the ones above included:
• Thomas Mayer of the Swiss Vollgeld-Initiative has identified > Seven ways of how sovereign money can be brought into circulation
• Similarly > Accounting for Sovereign Money. Why State-Issued Money is Not 'Debt' by Ben Dyson and Graham Hodgson of Positive Money.
• Andrew Jackson (Positive Money) has nicely put together
T-accounts representing the transition from bankmoney to sovereign money >
• Uli Kortsch (The Monetary Trust Initiative) and Jamie Walton (American Monetary Institute) on > Public Money Accounting Principles in the U.S.