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.

Tags

bank

crypto

crypto research

digital currency

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