New CEPR eBook - Central Bank Digital Currency: Considerations, Projects, Outlook

Wednesday, November 24, 2021

Central bank digital currencies (CBDCs) are receiving more attention than ever before. Yet the motivations for issuance vary across countries, as do the policy approaches and technical designs. As of yet, no major jurisdiction has decided to issue a CBDC, and many open questions remain. 

A new CEPR book sheds light on the economic, legal and political implications of CBDC, discusses existing initiatives and scopes out the future of the digital financial landscape. While consensus on what consists of the ‘right’ CBDC choices remains elusive, common perspectives emerge from the research: First, money, banking and payments are ripe for upheaval, with or without CBDC. Second, the key risk of CBDC is unlikely to be bank disintermediation; privacy, politics and information may be more critical. Third, the use case for CBDC must be clarified, country by country; it may not exist, because of alternative, better solutions for the existing problems. And fourth, as the implications of CBDC go far beyond the remit of central banks, parliaments and voters should have the final say.


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Edited by Dirk Niepelt, the book is a product of CEPR’s Research and Policy Network on FinTech and Digital Currencies, and contains contributions from experts from academia as well as monetary authorities and international organisations including the Bank for International Settlements, Bank of Canada, European Central Bank, Federal Reserve Bank of St. Louis, Federal Reserve Board, International Monetary Fund, Riksbank and Swiss National Bank. Chapters within discuss the progress of current projects, including analyses of the cases of Canada, the United States, Sweden and Europe.

The landscape of digital currencies is constantly evolving, and private sector initiatives over the last few years have ultimately forced central banks to take CBDC considerations seriously. Monetary authorities, mindful of being left behind, have shifted from observers to active contributors, albeit often sceptical ones. 

“It has become evident that the implications of CBDC extend far beyond the realms of payments, monetary policy and financial stability. And consequently, there is growing awareness that parliaments and voters – not only central banks – should actively join the debate.”

What is clear from the research is that while our understanding of what constitutes the correct strategy to employ regarding CBDC choices  – no, or yes and how – is far from settled, the arguments have become sharper and the trade-offs clearer. 

You can also read a VoxEU column here