Central Bank Digital Currency

Central Bank Digital Currency (CBDC) has become a widely discussed topic among policy makers. See the impact of it from the report.

Since 2018, Central Bank Digital Currency (CBDC) has become a widely discussed topic among policy makers. The crypto community also shows significant interest towards CBDC since it may have a profound impact on cryptocurrencies in general.

• CBDC, in simplest terms, is a digital form of fiat currency established by governments or central banks
  
• CBDC can have many variations and possible designs:
  • Wholesale vs Retail
  • Central Bank-managed vs Synthetic
  • Interest-bearing vs non-interest-bearing
  • Deposit limit vs no deposit limit
  • Centralized vs DLT-based
  • Programmable vs Non-programmable
  • Token-based vs Account-based
  • Privacy-preserving vs non-privacy-preserving
    
• CBDC may bring opportunities:
  • Supporting a resilient payments landscape
  • Fostering competition, efficiency and innovation in payments
  • Enhanced financial inclusion
  • Enhanced monetary policies
  • Meeting future payments needs in a digital economy
  • As an enabler for better cross-border payments
  • Countering new digital currencies
    
• But also risks:
  • Banking-sector disintermediation
  • Run risk
  • Implications for central bank balance sheets and credit allocation
  • Additional burden to the central bank
  • Cyberattack and system outage
  • Digital dollarization
    
• More central banks are currently (or will soon be) engaged in CBDC work

Read the full PDF version of the Central Bank Digital Currency here.