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Are Central Bank Digital Currencies (CBDCs) the money of tomorrow?

Central bank digital currencies (CBDCs) have undeniably stepped into the limelight and we believe they are here to stay. While the theoretical concept of CBDCs already emerged several years ago, an increasing number of countries and central banks are now assessing CBDCs in view of putting them into practice.

No wonder central banks now want to seize the opportunities of this digital innovation to power the economy of tomorrow

Executive summary

The surge in scrutiny is due to a combination of developments in the financial ecosystem, including the recent major shifts in the payment industry, the launch of cryptocurrencies and stablecoins, and the declining use of cash. Each country and jurisdiction is affected in varying degrees by these developments and is appearing to use CBDCs in line with its most pressing issues and policy objectives.

For instance, the Swedish Riksbank is focusing on issuing an electronic Krona to provide an alternative state-guaranteed means of payment and to ensure financial stability in case of private market failures. In contrast, the Monetary Authority of Singapore is focusing its efforts on providing faster and cheaper cross-border transactions and foreign currency exchange. These diverging objectives show that CBDCs can be used for different purposes by virtue of their highly versatile and customizable nature.

This paper aims to not only present the key principles of CBDCs, but also demonstrate potential CBDC models and how they are currently being assessed by central banks. We will also highlight the key challenges inherent to CBDCs and express how we see the future of CBDCs. The paper is structured in the following way:

1. In the beginning, there was money

2. The rise of money digitalization

3. What are the scope and purpose of CBDCs?

4. Where do we stand on CBDC deployment so far?

5. Key challenges and regulatory implications of CBDCs

6. How we see the future of CBDCs

Are Central Bank Digital Currencies (CBDCs) the money of tomorrow?
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