CBDC design and implementation in the context of differences between advanced and emerging economies

Abstract

Central bank digital currency (CBDC) is nowadays being considered in many jurisdictions, both advanced and emerging economies. Some countries have already made initial implementations. CBDC may exist in the wholesale as well as retail (general purpose) form and moreover cross-border functionalities are currently deeply analyzed and discussed. This chapter refers mostly to the opportunities, challenges and dilemmas related to the CBDC in the context of differences in motives and needs in advanced and emerging economies; thus, the necessity for tailored design in the field of CBDC occurs. The old truth that one size does not fit all finds a strong confirmation in this analysis. The differences in motives between emerging and advanced economies regarding CBDC are investigated, as well as perceived pros, cons and risks. They, in turn, translate into a debate on the design and functionalities of CBDC. The design choices in the field of CBDC include among others: architecture (direct versus intermediated CBDC), technology (distributed ledgers versus centralized solutions), remuneration and the degree of anonymity, furthermore on-line and off-line access, potential transaction limits as well as cross-border functionality and interoperability with existing payment systems. The appropriate design (that takes into account the needs of a given economy and society) eventually determines how a particular CBDC project addresses the challenges and risks and allows for achieving the assumed benefits. The topic is discussed through the prism of the first international experiences in the field of retail CBDC.