Central Bank Digital Currencies

The declining use of cash and the growing role of crypto assets have led central banks to contemplate CBDCs. A CBDC is a publicly issued digital money denominated in the national unit of account. It is issued and regulated by a country’s national authority or central bank. As such, it offers, in digital form, the unique advantages of central bank money: monetary anchor, settlement finality, liquidity and integrity. There are two main types: a retail CBDC is issued to the general public, such as individuals and businesses, and exhibits characteristics of cash (but in digital form), while a wholesale CBDC is issued primarily for interbank transactions and available only to selected financial institutions (similar to bank reserves). However, compared to bank reserves, a wholesale CBDC may be accessible to a wider range of counterparties and be interoperable with other payment systems (both domestic and foreign). CBDCs may be programmable in the form of smart contracts. Most developing country central banks are investigating both retail and wholesale CBDCs (Kosse and Mattei, 2022).

Sustainable Development Goals:

Reduced Inequalities