Central Bank Digital Currencies and the Future of Value Transfer: Developments, Challenges, and Strategic Implications

Abstract

The most recent development in digital currency and payments is Central Bank Digital Currencies (CBDCs). In an effort to regain monetary sovereignty, some central banks have either stated their intention to do so (such as the US Federal Reserve, the European Central Bank, and the Bank of England) or have already done so (such as the People's Bank of China). This may be the last chance for these central banks to do so. In our recent work, this paper hypothesise that CBDCs represent a last frontier in the field of digital money and digital payments, rather than only signalling the state's comeback in this area.
However, there are a number of issues with CBDCs, including as their practical use and legal classification, as well as concerns about the technology that central banks would use to implement them in the economy. Legally speaking, CBDCs would be considered a central bank liability, or a claim on the central banks, and are intended to be a type of fiat currency.
Given the digitisation of international payments, which is dependent on the technology's connectivity, certain CBDCs may be utilised across borders in addition to domestically.