Central financial institution digital currencies (CBDCs) are within the limelight. However the causes for issuing them range between international locations, as do the coverage approaches and technical designs. This paper appears on the financial and institutional motives behind present CBDC tasks and asks how they could form the design of such currencies.
We draw up a database of analysis and growth work, technical approaches and coverage stances for the issuance of CBDCs. We assess the coverage stance primarily based on a database of greater than 16,000 central financial institution speeches. We additionally take inventory of precise growth efforts, offering a taxonomy of technical designs from all related coverage and analytical publications printed by central banks worldwide. Subsequent we have a look at the drivers of CBDC tasks by relating growth depth to the financial and institutional variations between international locations. Primarily based on public studies and interviews with central financial institution specialists, we set out the coverage approaches behind three CBDC tasks: China’s Digital Foreign money Digital Funds (DC/EP), Sweden’s e-krona and the Financial institution of Canada’s CBDC contingency plan.
On the drivers for CBDC growth, we discover that the majority tasks originate in digitised and progressive economies. Retail CBDC work is extra superior the place the casual financial system is bigger. Not one of the tasks surveyed seeks to exchange money – all purpose to supply a digital complement.
On the technical designs, we discover that an increasing number of central banks are contemplating “Hybrid” or “Intermediated” architectures, the place the CBDC is a cash-like direct declare on the central financial institution however the personal sector manages all customer-facing exercise. Only some jurisdictions are contemplating “Direct” designs, through which the central financial institution takes on some or the entire customer-facing facet of funds. At current, no central financial institution studies that it’s pursuing a “Artificial” or “Oblique” CBDC design.
Whereas central banks are contemplating numerous technical infrastructures, present proofs-of-concept are usually primarily based on distributed ledger expertise fairly than a standard infrastructure. Entry frameworks are usually primarily based on account identification fairly than permitting for token-based anonymity. Most retail CBDC tasks have a home focus.
Central financial institution digital currencies (CBDCs) are receiving extra consideration than ever earlier than. But the motivations for issuance range throughout international locations, as do the coverage approaches and technical designs. We examine the financial and institutional drivers of CBDC growth and take inventory of design efforts. We set out a complete database of technical approaches and coverage stances on issuance, counting on central financial institution speeches and technical studies. Most tasks are present in digitised economies with a excessive capability for innovation. Work on retail CBDCs is extra superior the place the casual financial system is bigger. We subsequent take inventory of the technical design choices. An increasing number of central banks are contemplating retail CBDC architectures through which the CBDC is a direct cash-like declare on the central financial institution, however the place the personal sector handles all customer-facing exercise. We conclude with an in-depth description of three distinct CBDC approaches by the central banks of China, Sweden and Canada.
JEL classification: E58, G21
Key phrases: central financial institution digital foreign money, CBDC, central banking, digital foreign money, digital cash, distributed ledger expertise, blockchain