How Should Central Banks Explore Central Bank Digital Currency?

FinTech Notes - Note/2023/008

43 Pages Posted: 9 Jan 2024

See all articles by Gabriel Söderberg

Gabriel Söderberg

Independent

John Kiff

Kiffmeister Consulting

Hervé Tourpe

International Monetary Fund (IMF)

Marianne bechara

Independent

Stephanie Forte

Independent

Kathleen Kao

International Monetary Fund (IMF)

Ashley Lannquist

Independent

Tao Sun

International Monetary Fund (IMF)

Akihiro Yoshinaga

International Monetary Fund (IMF)

Date Written: September 8, 2023

Abstract

Digitalization of the economy provides both challenges and opportunities. Central banks should ensure that they have the capacity to continue to meet their policy objectives in the digital age. It is in this context that central bank digital currency (CBDC) should be evaluated. If designed appropriately, CBDCs could allow central banks to modernize payment systems and future-proof central bank money as the pace and shape of digitalization continues to evolve. However, the decision to proceed with CBDC exploration and an eventual launch would need to be jurisdiction specific, depending on the degree of digitalization of the economy, the legal and regulatory frameworks, and the central bank’s internal capacity. This paper proposes a dynamic decision-making framework under which the central bank can make decisions under uncertainty. A phased and iterative approach could allow central banks to adjust the pace, scale, and scope of their CBDC projects as the domestic and international environment changes.

Keywords: CBDC, Digital Currency, Central Banking

JEL Classification: E42, E5, G2

Suggested Citation

Söderberg, Gabriel and Kiff, John and Tourpe, Herve and bechara, Marianne and Forte, Stephanie and Kao, Kathleen and Lannquist, Ashley and Sun, Tao and Yoshinaga, Akihiro, How Should Central Banks Explore Central Bank Digital Currency? (September 8, 2023). FinTech Notes - Note/2023/008, Available at SSRN: https://ssrn.com/abstract=4663934 or http://dx.doi.org/10.2139/ssrn.4663934

Gabriel Söderberg

Independent ( email )

John Kiff (Contact Author)

Kiffmeister Consulting ( email )

VA
United States

Herve Tourpe

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Marianne Bechara

Independent ( email )

Stephanie Forte

Independent ( email )

Kathleen Kao

International Monetary Fund (IMF) ( email )

Ashley Lannquist

Independent ( email )

Tao Sun

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Akihiro Yoshinaga

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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