Central Bank Digital Currencies: Motives, Economic Implications, and the Research Frontier

TLDR

Central banks have accelerated research and development on CBDCs, yet the literature largely focuses on the “reserves for all” retail use while overlooking broader digital economy issues such as competition, payment system integrity, and privacy. This review surveys microeconomic aspects of CBDC operation architectures, technologies, and privacy, and macroeconomic implications for the financial system, stability, and monetary policy, while highlighting unresolved cross‑border questions that warrant further study. The authors conduct a guided tour of the expanding CBDC literature, synthesizing findings on operation architectures, technologies, privacy, and macroeconomic impacts.

Abstract

In just a few years, central banks have rapidly ramped up their research and development efforts on central bank digital currencies (CBDCs). A growing body of economic research informs these activities, often focusing on the “reserves for all” aspect of CBDCs for retail use. However, CBDCs should be considered in the full context of the digital economy and the centrality of data, which raises concerns around competition, payment system integrity, and privacy. This review gives a guided tour of the growing CBDC literature on the microeconomic considerations related to operation architectures, technologies, and privacy as well as the macroeconomic implications for the financial system, financial stability, and monetary policy. A set of questions, particularly on the cross-border dimensions of CBDCs, remains unresolved and calls for further work to expand the research frontier.