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5. CBDCs

CBDC stands for “Central Bank Digital Currency”


Core message: CBDCs are being heralded as the safest form of digital money as they are a direct liability on the balance sheet of central banks. Expect rapid international adoption.

Our 2-Cents: By their nature CBDCs are centrally controlled, so it is important that issues relating to surveillance / data privacy / programmable money are sufficiently understood and addressed.

Let's break it down...

A Central Bank Digital Currency (CBDC) is the digital form of a country’s fiat currency that is also a claim on the central bank. Instead of printing money, the central bank issues digital money that is backed by the government.


CBDCs can be divided into two categories:

Wholesale CBDC: available only to financial

institutions that carry reserves with a central bank.

It can improve the efficiency of payment and security settlement between financial institutions.

Retail CBDC: accessible to all (individuals and

businesses) and can be used as an additional means

of payment besides cash and commercial bank money.


In today’s financial system, digital fiat money is available only to regulated financial institutions, in the form of reserves - accounts held by commercial banks at the central bank. Wholesale CBDCs are similarly restricted to financial institutions.

Retail CBDCs in contrast are available to the general economy. Account-based retail CBDCs would be tied to an identification scheme and all users would need to identify themselves. Token-based retail CBDCs would be accessed via password-like digital signatures and could be accessed anonymously.

CBDCs can be based on either distributed ledger technology (DLT) or conventional technological infrastructures.

International Interest in CBDCs

87 countries (representing over 90 percent of global GDP) are exploring a CBDC. In May 2020, only 35 countries were considering a CBDC.

In most cases, CBDCs are being designed such that they preserve the two-tier structure of the monetary system (central bank and commercial banks/financial institutions), with a division of labour between the public and private sector.


The Sand Dollar was issued by the Central Bank of the Bahamas in October 2020. It was the first nationwide CBDC

in the world.

Nigeria became the first country in Africa to launch a CBDC in October 2021. 

China became the world's first major economy to pilot a digital currency in April 2020. It currently has more than two hundred million individual users and billions of yuan in transactions, according to the IMF.

India is set to launch a state-backed digital currency by next year, the government announced last week. The "digital rupee" will be based on blockchain technology and is expected to be up and running by the end of March 2023. It will

be backed by the Reserve Bank of India.

The European Central Bank (ECB) is actively looking into creating a digital version of the euro. A bill for a digital euro

will be proposed in 2023.

Reasons Cited for Adopting CBDCs

Two of the most commonly cited reasons for this high level of interest:

  1. The success of Bitcoin and other cryptocurrencies / stablecoins

  2. The declining use of cash in society (accelerated by Covid pandemic)

The main benefits of CBDCs for Central Banks:

Control: Central Banks retain sovereignty over monetary policy and not allow alternative currencies to dominate the market

Enhance payments infrastructure: A new form of money that increases the speed and efficiency of payments both domestic and international

Innovation: Use of advanced digital features like smart contracts and programmable money that will be the basis of new financial services

The main benefits of CBDCs for individuals and corporates:

Convenient: As easy as using cash

Accepted and available: Used in point of sale, person-to-person, business-to-business (and variations thereof) with some use in offline transactions available. Capable of very high numbers of transactions per second

Low cost: Very low, or no, cost for end-users

Instant: Instant, or near-instant, final settlement for domestic and international transactions

Innovation and automation: Far greater potential for innovation and automation using digital currencies

The Main Concerns in Adopting CBDCs

Privacy: The potential for surveillance using CBDC will be beyond anything that currently exists

Control: Digital money will not necessarily be fungible. It will be possible to impose new types of restrictions aimed at specific individuals or groups (e.g., expiry dates and restricted uses)

Censorship: The potential for censorship is far greater than currently exists (e.g., blocking accounts and transactions or deleting digital money)

Bank Runs: CBDCs are by their nature more secure than commercial bank money so bank runs need to be avoided: with people looking to purchase CBDCs with commercial bank money - in the case of a retail CBDC.


You are Here:
5. CBDCs



Bank of International Settlements

Central bank digital currencies: foundational principles and core features



Bank of International Settlements

International settlements using multi-CBDCs



Federal Reserve

Bank of Boston

A High Performance Payment Processing System Designed for Central Bank Digital Currencies



Latest information on Central Bank Digital Currencies (CBDC) worldwide

Think Tank on the future of digital currencies and payments

Specialize in central bank digital currencies (CBDCs), especially the Digital Euro.

A Forum supporting the implementation of a well-designed digital Pound.

Where the public and private sectors meet to shape the digital future of finance.

A nonpartisan public policy, research and advocacy group, representing U.S. banks.

Central Bank.


Support for Central Banks.


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