Central bank digital currencies: policy implications

ABSTRACT This paper lists fifteen key policy implications resulting from a decision to introduce retail and/or wholesale central bank digital currencies (CBDCs). It makes the distinction between ‘medium of exchange’ and the ‘exchange mechanism’. The former is one of the functions of money. The latter is a function of the technological approach in establishing the unit of account, store of value, and the payment protocol. Payments, transfers and settlement, are explored in respect of (i) wholesale CBDCs, (ii) retail CBDCs, (iii) digital payment platforms and, (iv) stablecoins. Each require distinct policy frameworks, and scholarly opinion on these are very diverse. Most academics agree on the privacy concerns related to account based digital money. The main areas of disagreement, however, are over which institutions/entities should be allowed to issue digital money, how such issuance should be supervised, and how decentralised digital tokens should be addressed from a policy perspective.