central banks digital currencies

bitcoin

a peer-to-peer digital currency system

• it is able to work without trusted intermediary, relying on a protocol shared among all of the network participants

central bank digital currency

the creation of multiple private currenices could disrupt global monetary and financial dynamics, undermining the institutional roles of governments and central banks.

the critical need for central banks to explore blockchain technology

CBDC» digital money issued by central banks

CBDC

as a response to:

• decentralized trends like cryptocurrencies

• private tokens

• decline of cash usage

• AIM: to provide regulatory oversight and financial stability while promoting innovation

• depend strongly on needs and requirements of consumers (efficiency to use in payment systems, accesiblity, resiliency etc.)

tokenization

• the process of digitally representing a real asset on a distributed ledger

• representation of traditional assets, financial instruments on a DLT platform.

• embedding the economic value and righjts of real assets into digital tokens on the blockchain

the impact of CBDC

• could support a more effective transmission of monetary policy

• could prompt banks to react by increasing interest rates on customer deposits.

• reserve banking might no longer be viable

• risk of potential reduction of banks’ balance sheets which could limit the availability of credit

involvement of private sector in cbdc

• commercial banks could be providers of CBDC related services

• could hinder the development of CBDC in a competitive environment driven by private-sector

• BUT involving a diverse range of service providers enhances credibility, promotes CBDC adoption, improves both customer services and system reliance.

• a larger number of providers boosts ecosystem resilience and reduces reliance on a single producer

IMF- CBDC

• to promote financial inclusion: especially in emerging and lower-incpome countries. access to payments without a bank account, low or no fees, less strigngent identity requirements for low risk popula

• could stimulate competition by lowering the prices of payments and financial services

• cyber risks should be mitigated

• cbdc adoption: chicken egg dilemma: consumers depend on the participation of merchants. relevant regulations, education

• cbdc data can be leveraged to create value to end-users and for policy decisions while protecting privacy

digital euro

• would offer choice to customers and businesses where physical cash cannot be used.

• would be a complement to cash

• both cash and digital euro could be widely available to and accepted by users in the euro area

• promoting accessiblity, financial inclusion, tailored to users’ needs, while preserving financial stability

• facilitate pan-european retail payment solutions, promoting efficiency abd innovation

• possiblity to pay even without a bank account

• privacy is protected when used online, just like cash