CBDC: Concepts, Benefits, Risks, Design, and Implications

40 Pages Posted: 3 Oct 2022

See all articles by Yibin Mu

Yibin Mu

International Monetary Fund; Harvard University; World Bank

Angela Mu


Date Written: October 1, 2022


An increasing number of central banks have started to explore central bank digital currencies (CBDCs). Although CBDCs are developing rapidly and well defined, they are not always well understood. This paper helps clarify how CBDCs fit into the wide range of digital monies/digital payments, assesses their potential benefits and risks, discusses mitigation measures, analyzes design issues, and draws policy implications from the perspective of countries at different stages of development. While CBDCs could provide benefits, including enhancing payment efficiency and financial inclusion, poor design and implementation carries risks to data security, financial intermediation, financial integrity, and currency substitution. Mitigation measures include managing the pace of adoption, establishing proper collaboration between central banks and key private stakeholders, incorporating AML/CFT and KYC into the design of a CBDC, enhancing digital data security and protection, and pre-developing collaboration with foreign central banks to ensure interoperability between different jurisdictions. There is no one-size-fits-all approach with regarding to the modality between CBDCs and private digital payments. Each jurisdiction must choose based on features of their financial sector and country-specific circumstances.

JEL Classification: E42, E51, E52, E58, F02, F33, F55

Suggested Citation

Mu, Yibin and Mu, Angela, CBDC: Concepts, Benefits, Risks, Design, and Implications (October 1, 2022). Available at SSRN: https://ssrn.com/abstract=4234876 or http://dx.doi.org/10.2139/ssrn.4234876

Yibin Mu (Contact Author)

International Monetary Fund ( email )

1700 19th Street, NW
Washington, DC 20431
United States

Harvard University ( email )

Cambridge, MA 02138
United States

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Angela Mu


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