Central Bank Digital Currency

Bhatta, B. (Contributor)

Activity: Consultancy types › Contribution to the work of national or international committees and working groups

Description

Introduction to Central Bank Digital Currency (CBDC) and how central banks are still trying to understand it.

Period	Jan 2023
Work for	Certified Public Accountants in Ireland (CPA), Ireland

Documents & Links

At this stage, it is not even clear if Central Bank Digital Currency (CBDC) would bring additional value to central banks. On the face of this uncertainty, perhaps it is a good sign that central banks are proactively scanning the environment, being cognizant of what is happening now and trying to suss out the complexities that lie ahead. The act of doing nothing, although an option, would be considered harmful by many. But this also does not mean that adoption of CBDC by central banks is a foregone conclusion. Just because one financial innovation is beneficial to one set of market participants does not necessarily mean that it is going to be beneficial to another set of market participants. Recent turmoil in the financial markets have taught us not just about the benefits of financial innovation but also of the dangers that lurk beneath. Vested with the responsibility of maintaining price and financial stability in their respective economies, central banks need to be reasonably sure regarding net positive gains brought about by CDBC, not just in terms of price and financial stability but also in terms of efficient payment systems and financial inclusivity. Before this determination can take place, a long and arduous process of examination and experimentation is in order. The benefits so accrued by CBDC should be over and above what is currently afforded by the current system in place.