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.

Aug 10, 2021

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.

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