Abstract
The widespread adoption of the cryptocurrencies and stable coins has enabled central banks across the world to research and roll out a central bank-issued digital currency, which could address different problems based on the type. Wholesale central bank digital currency (CBDC) – available only for commercial banks and clearing houses for use in the wholesale interbank market retail CBDC – is widely available for consumer use. CBDC would be fundamentally different to cryptocurrencies as they are issued by the central bank and backed by government securities. CBDC would be a risk-free currency and therefore perform all the essential functions of the money. Blockchain/distributed ledger technology (DLT) would form the backbone of CBDC by making it more decentralized and ensuring innovations in cross-border transactions, retail payments and gross settlements in digital money. Elements of DLT such as decentralization, sharing of data and use of cryptography and programmability would enhance the purpose and utilization of CBDC. This chapter gives a detailed overview on the implementation and design aspects that need to be considered before rolling out CBDC using DLT and the associated use cases.
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