Central Bank Digital Currencies: Motives, Economic Implications and the Research Frontier

Abstract

In just a few years, central banks have rapidly ramped up their research and development effort on central bank digital currencies (CBDCs). A growing body of economic research informs these activities, often focusing on the “reserves for all” aspect of CBDCs for retail use. However, CBDCs should be considered in the full context of the digital economy and the centrality of data, which raises concerns around competition, payment system integrity and privacy. This paper gives a guided tour of the growing literature on CBDCs on the microeconomic considerations related to operational architectures, technologies and privacy, and the macroeconomic implications for the financial system, financial stability and monetary policy. A set of questions, particularly on the cross-border dimensions of CBDCs, remains unresolved, and calls for further work to expand the research frontier.

Keywords: money, digital currencies, central banks, central bank digital currencies, CBDC, stablecoins, cryptocurrencies, distributed ledgers, big tech, data privacy

JEL Classification: C72, C73, D4, E42, E58, G21, O32, L86