Central Bank Digital Currencies: A Review of Operating Models and Design Issues
18 Pages Posted: 8 Feb 2023
Date Written: December 15, 2022
Abstract
The topic of Central Bank Digital Currencies (CBDC) is highly relevant to deposit insurers. As an increasing number of central banks further their research and planning efforts in CBDC, IADI members are encouraged to intensify their understanding of the potential impact of the introduction of a CBDC in their own as well as in other jurisdictions.
To assess the potential impact of a CBDC, a sound understanding of operating models and design features is crucial. These will affect factors of key interest to deposit insurers, such as the degree of replacement of bank deposits by CBDC. Also, the implications of choices regarding operating models and design features extend to the division of labour between central and commercial banks and the degree of privacy attached to CBDC usage.
The paper offers a review of key issues relevant to deposit insurers regarding operating models and design features for CBDC, and links these to early global policy standards. Whilst not recommending a particular CBDC design, deposit insurers are encouraged to develop a deeper understanding of the principles presented and how the different policy options may affect the provision of deposit insurance.
This paper acts as a follow up to a previous IADI Fintech Brief which highlighted some key motivations for CBDCs by central banks. An upcoming paper will deal with the potential implications of CBDC for deposit insurers.
Keywords: deposit insurance, bank resolution
JEL Classification: G21, G33
Suggested Citation: Suggested Citation