Casting Light on Central Bank Digital Currency

Abstract

Several central banks have begun actively investigating the possibility of issuing central bank digital currency (CBDC). This new central bank liability would be a widely accessible digital form of fiat money, intended as legal tender. This chapter aims to answer a simple question: Does CBDC offer benefits? On the demand side, would it satisfy end user needs better than other forms of money? And on the supply side, would issuing CBDC allow central banks to more effectively satisfy public policy goals, including financial inclusion, operational efficiency, financial stability, monetary policy effectiveness, and financial integrity? In short, is CBDC a desirable form of money given existing and rapidly evolving alternatives? The chapter includes a summary of pilot projects and studies from central banks exploring the possibility of issuing CBDC. The analysis is based on publicly issued materials and discussions with staff members at central banks and technology providers around the world.