How Should Central Banks Explore Central Bank Digital Currency?

Fintech Notes, September 8, 2023

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Bibliographic details

• Authors: Gabriel Soderberg, John Kiff, Hervé Tourpe, Marianne Bechara, Stephanie Forte, Kathleen Kao, Ashley Lannquist, Tao Sun, Akihiro Yoshinaga
• Published: September 8, 2023
• Series: Fintech Notes
• DOI: https://doi.org/10.5089/9798400253768.063

Overview

• 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.
• Central bank digital currency (CBDC) should be evaluated in this context: 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.
• 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.

Key findings

• CBDCs can modernize payment systems and future-proof central bank money when designed appropriately.
• Jurisdiction-specific considerations are central to the decision to explore and launch a CBDC.
• A dynamic decision-making framework can help central banks make decisions under uncertainty.
• A phased and iterative approach allows central banks to adjust the pace, scale, and scope of CBDC projects as the domestic and international environment changes.

Decision-making framework (proposed)

• Dynamic framework enabling decision-making under uncertainty.
• Phased and iterative approach to:
  • adjust pace,
  • adjust scale, and
  • adjust scope

of CBDC projects in response to changing domestic and international conditions.

Policy recommendations and implementation approach

• Evaluate CBDC in light of digitalization’s impact on policy objectives.
• Tailor exploration and launch decisions to jurisdiction-specific factors:
  • degree of digitalization of the economy,
  • legal and regulatory frameworks,
  • central bank internal capacity.
• Adopt a phased, iterative project design to retain flexibility and responsiveness.

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