Unpacking Central Bank Digital Currency (CBDC) Implementation Challenges and Risks

Abstract

This chapter outlines the risks and challenges involved in implementing central bank digital currency (CBDC). Interest in CBDC is currently growing, with a number of central banks paying it serious consideration, and a number of countries are implementing or piloting CBDC. Although CBDC holds a great deal of promise, its implementation is not without difficulty. This chapter highlights the major implementation issues, such as CBDC contributing to financial exclusion, technology risks, CBDC's inability to work in an offline environment, lack of privacy, and confidential consideration, since anonymity is difficult to achieve. The chapter concludes by highlighting the need to deploy CBDC with greater attention paid to societal, economic, and political factors instead of a purely technocratic approach.