Impact of Central Bank Digital Currencies (CBDCs) on Monetary Policy Transmission Mechanisms: Evidence from Recent Global Implementations

This explores the implications of digital currencies for monetary policy and central banking in Africa, focusing on both opportunities and challenges. The rapid rise of digital currencies—ranging from Central Bank Digital Currencies (CBDCs) to cryptocurrencies and stablecoins—has significant consequences for African economies, where financial systems are evolving alongside digital innovations. Several African central banks, such as the Central Bank of Nigeria with its eNaira, are experimenting with or researching CBDCs to enhance financial inclusion, improve payment systems, and safeguard monetary sovereignty. This examines how digital currencies may influence key monetary policy transmission mechanisms, including interest rates, credit supply, and exchange rates. While CBDCs could strengthen monetary policy effectiveness by enabling direct monetary interventions and improving policy transmission, they also pose risks, such as disintermediation of the banking sector and challenges to money supply control. Furthermore, the rise of private cryptocurrencies could undermine monetary sovereignty by increasing currency substitution and capital flight risks. This also discusses the financial stability implications of digital currencies, including cybersecurity risks, operational vulnerabilities, and systemic risks arising from crypto-asset markets. It highlights the need for robust regulatory frameworks to manage these risks effectively while ensuring technological innovation is not stifled.In addition to risks, digital currencies offer significant opportunities for African economies, particularly in promoting financial inclusion and reducing cross-border payment costs. Strategic recommendations include phased CBDC implementation, investments in digital infrastructure, strengthened cybersecurity, regulatory reforms, and regional cooperation among African central banks. This concludes that a proactive and collaborative approach is essential for African central banks to harness the benefits of digital currencies while mitigating risks to monetary policy and financial stability. Digital currencies are poised to reshape Africa’s financial landscape, requiring adaptive, forward-looking policy responses.

Purpose The paper aims to examine the implications of central bank digital currency (CBDC) for the Indonesian macroeconomics. It proposed simulation modeling and outlining feasibility of CBDC for the financial inclusion tool. The purpose of the study is to determine how CBDC affects the Indonesia’s macroeconomics variables. Design/methodology/approach The paper uses Dynamic Stochastic General Equilibrium (DSGE) that include both financially included and financially excluded household to see the impact of CBDC on the monetary and fiscal policy implications, using case study of Indonesia. Descriptive analysis of the present state of financial inclusion in Indonesia was included to the data. Findings Empirical results suggest that CBDC has potential as a financial inclusion tool. The CBDC interest rate hike reduced output and inflation. Consequently, monetary policy in the post-CBDC period is more effective than the pre-CBDC period, due the financially excluded households are more responsive to monetary policy. CBDC also lessens the vulnerability of financially excluded households to economic shocks caused by increases in labor income tax, consumption tax and productivity. However, after the CBDC, government expenditures became increasingly ineffective. Research limitations/implications This study excludes the financial sector block. Instead, the model assumes that the CBDC interest rate is lower than the deposit rate. Therefore, the deposit should not be displaced as a source of commercial banking credit. This research might be expanded by incorporating the financial industry and looking into the impact of CBDC on the financial sector intermediation process. Practical implications This study contributes to the CBDC literature discussing the debate on the impact of introducing a CBDC on macroeconomic variables by developing and estimating a closed economy DSGE model. The paper also examine the impact of CBDC on heterogeneous households, both financially included and excluded households. Research involving financially excluded households is essential to see whether the motivation of emerging countries to use CBDC as a means of financial inclusion can help people who do not have access to formal financial institutions to perform consumption smoothing when a shock occurs in the economy. Originality/value This paper addresses recognized research need to study how CBDC could enhance financial inclusion.

Over the last decade, monetary policy frameworks and instruments have undergone significant modifications. In this regard, Central Bank Digital Currency (CBDC) has emerged as a new money invention to offset the advancement of cryptocurrencies and maintain central ability to distribute cash as a common good. Thus, the purpose of this study is to examine how the adoption of CBDC can change monetary policy transmission mechanism. CBDC can disintermediate the conventional banking industry and produce inflationary pressure through the money supply unless central banks adopt suitable regulatory frameworks to facilitate a seamless transition. On the other hand, a well-structured CBDC can encourage increased financial inclusion, resulting in a favourable outcome on the interest rate pass-through of monetary policy. Meanwhile, since interest-bearing CBDC can affect bank reserves, deposit rates and lending policies, it can also have an impact on the credit channel.

Subject. The article discusses the potential use of digital currencies as a new form of money that is explored by various central banks around the world. Such innovations may alter the structure of money circulation, and have ambiguous effects on the transmission mechanism of monetary policy. Objectives. The aim is to explore the key characteristics of central bank digital currencies (CBDCs) design and their impact on the monetary system. Methods. The study draws on general scientific methods, i.e. analysis, synthesis, comparison, scientific abstraction, typology, generalization, mathematical analysis and modeling, deduction and induction. Results. The paper presents a general definition of CBDCs and highlights the main challenges associated with their issuance. It suggests that the most suitable concept is interest-bearing CBDCs with indirect free exchange for reserves and non-guaranteed convertibility into deposits. This configuration of the monetary system allows the central bank to have a new monetary policy tool at its disposal and address a number of issues related to the use of CBDCs. Conclusions. The design of CBDCs depends on central bank's objectives. If the monetary authority aims to enhance financial inclusion, it should introduce non-interest-bearing, universally accessible CBDCs. However, if the central bank's goal is to acquire a new monetary policy instrument and ensure the stability of the financial system, the CBDCs should provide appropriate yield that corresponds with the central bank’s objectives.

The paper analyses the potential impact on monetary policy transmission stemming from the adoption of a central bank digital currency (CBDC). Bank funding conditions and potential profitability effects are the main channels through which CBDC could have a bearing on monetary policy transmission via banks. As is the case for banknotes, the central bank balance sheet identity operates in effect as an aggregate consistency restriction that prevents CBDC from creating funding scarcity for the banking system as a whole. However, without policy neutralising actions, the new resulting bank funding mix might be less favourable for banks, thus potentially leading to suboptimal outcomes from a monetary policy perspective, such as restrictions in credit supply. Analysing the transmission channels through which banks obtain the necessary reserves suggests that a CBDC could have a material impact on bank lending conditions only if some relevant frictions, such as collateral constraints or liquidity shortages, materialise. Adverse funding conditions, such as those arising from lower bank liquidity or difficulty to access central bank funding or to tap the bond market, further paired with a large demand for CBDC, could affect bank lending conditions and the transmission of monetary policy. Importantly, even in this case, careful design, and implementation, as well as attentive communication can limit an unwarranted tightening coming from funding and liquidity tensions due to the rollout of CBDC. In addition, the central bank could take specific action to prevent or neutralise unwarranted impacts in order to maintain its desired monetary policy stance. In the longer term, a digital euro could support the digitalisation of the euro area banking sector, levelling the playing field for banks more exposed to competition from new players like big tech firms.

This research examines the development, implementation, and future prospects of central bank digital currencies (CBDCs), focusing on Nigeria’s e-Naira. The rise of digital currencies and blockchain technology has provided new payment options worldwide. CBDCs are increasingly seen as faster and cheaper alternatives for transactions, with potential benefits for payment settlements, financial inclusion, and monetary policy effectiveness. The e-Naira was introduced to complement Nigeria’s physical currency, representing a significant initiative by the Central Bank of Nigeria (CBN). As of March 2024, more than 130 countries were actively researching CBDCs, with three countries, territories, or currency unions having already launched CBDCs and 36 conducting pilot programs globally. This study delves into blockchain technology as a precursor to cryptocurrencies, analyzes recent trends in monetary policy, explores global factors driving CBDC emergence, and examines the e-Naira’s future trajectory. It also discusses key policy considerations and proposes strategies to promote e-Naira adoption. By synthesizing these aspects, the research offers a comprehensive view of CBDCs within Nigeria’s financial landscape, highlighting challenges and opportunities in digital currency adoption.

Central Bank Digital Currency with Adjustable Interest Rate in Small Open Economies

Asset-backed securities (ABS), 147 Asset-backed tokenization, 153 Asset-backed tokens (ABTs), 6, 146, 150-154 background, 148-150 benefits of tokenization, 154-155 capital requirements, 171-172 case studies, 156-161 challenges, 155-156 consultation outcomes, 173-176 general principles, 168-171 regulatory issues, 168-176 risks of permissionless DLTS and smart contracts, 161-168 Asset-pricing relationships comparison of cryptocurrency and equity market factors, 100-103 cryptocurrency pricing by equity and crypto factors, 104-108 cryptocurrency pricing by global and regional factors, 108-109 data, 98-100 Association of Proprietary Traders (APT), 174 Auto loans, 154 Automated teller machines (ATMs), 17

This paper aims to examine the revolutionary impact of digital technologies—specifically blockchain systems and central bank digital currencies (CBDCs)—on modern financial architecture and the processes of global economic integration. These technologies are rapidly transforming the structure and functioning of both national and international financial systems, placing states, markets, and institutions before new opportunities and challenges within the contemporary economic landscape. Blockchain technology, as one of the core components of Industry 4.0, is widely applied in areas such as peer-to-peer (P2P) transactions, trade finance, smart contracts, digital asset tokenization, and data protection. This research highlights its influence on the functional structure of financial markets, particularly in the context of international payments, transaction transparency, and cybersecurity. Simultaneously, the study explores the evolving role of traditional financial institutions—especially central banks—in the digital age. In Georgia, the emergence of blockchain-based startups in areas like payments, digital contract management, and data security is already evident, positioning this technology as a potential driver of economic transformation in the country. CBDCs, as digital currencies issued by central banks and directed both toward the general public (retail CBDC) and financial institutions (wholesale CBDC), differ from other digital innovations by serving as a strategic instrument that bridges monetary policy, sovereign currency systems, and international financial relations. In addition to blockchain, this study analyzes the potential role of CBDCs in global economic integration—specifically how they support the optimization of cross-border payment systems, increase financial inclusion, and strengthen digital sovereignty, particularly for developing economies. Furthermore, it addresses the geopolitical and regulatory complexities that accompany the global implementation of these technologies. Methodologically, the research employs a mixed-methods approach. The impact of blockchain is evaluated using financial market indicators from Yahoo Finance and Bloomberg, as well as global digital governance indices. The analysis of CBDCs relies on documentary review, including reports from international organizations (e.g., IMF, BIS, World Bank), academic literature, and regulatory frameworks developed by central authorities. The paper is structured as follows: the first section discusses the theoretical and practical aspects of blockchain technology; the second section focuses on the technological and policy foundations of CBDCs; the third section examines their impact on areas such as international trade, financial policy, monetary independence, and cybersecurity. Finally, the case of Georgia is presented as an example of the combined influence of blockchain and CBDCs in an emerging economy. The study’s main conclusion demonstrates that the integration of blockchain and CBDCs is transforming the rules of the game in financial markets. The technological architecture is shifting to a new digital paradigm, where fast, low-cost, and secure transactions are replacing traditional financial intermediaries. Simultaneously, the role of central banks is being strengthened in monetary and credit policy, while their responsibilities regarding cybersecurity and data protection are also expanding. Successful implementation of CBDCs will significantly enhance both domestic financial stability and participation in global monetary relations—provided that international cooperation, legal frameworks, and technical standardization are effectively developed. Similarly, the application of blockchain technology—particularly in Georgia—requires a strategic vision and infrastructure support to harness its potential not only for improving financial products but also for fostering economic development and integration into the global system. Therefore, this paper confirms that the digital technology revolution—namely blockchain and CBDCs—represents not only a technological shift but a profound structural transformation in the global financial architecture, requiring integrated policy approaches and coordinated actions at both national and international levels. Keywords: Blockchain technologies, digital currency, central bank, financial markets, economic integration, Georgian economy, CBDC, international trade, monetary policy.

Central Banks and the Future of Money

Purpose: This study sought to investigate the role of Central Bank Digital Currencies (CBDCs) in monetary policy transmission. Methodology: The study adopted a desktop research methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library. Findings: The findings reveal that there exists a contextual and methodological gap relating to the role of Central Bank Digital Currencies (CBDCs) in monetary policy transmission. Preliminary empirical review revealed that CBDCs enhanced monetary policy transmission by allowing faster, more direct, and more inclusive central bank interventions. Their effectiveness depended on infrastructure and trust, and while they offered significant benefits, risks like financial disintermediation required careful management. Unique Contribution to Theory, Practice and Policy: The Quantity Theory of Money (QTM), Interest Rate Channel of the Monetary Transmission Mechanism and the Financial Intermediation theory may be used to anchor future studies on Central Bank Digital Currencies (CBDCs). The study recommended phased CBDC implementation, updates to monetary theory, and practical safeguards to maintain financial stability. It also urged legal and regulatory reforms, promoted financial inclusion, and called for more research on CBDCs’ long-term economic impacts.

The coevolution effect of central bank digital currency and green bonds on the net-zero economy

This chapter explores the evolving landscape of global finance, specifically examining the profound influence of Central Bank Digital Currencies (CBDCs) on monetary and fiscal policy transmission mechanisms. It delineates the foundational principles of traditional monetary and fiscal policies, contrasting them with the transformative potential of CBDCs in achieving economic stability and growth. The analysis delves into CBDC's direct impact on macroeconomic factors, including financial stability, bank profitability, and financial inclusion, from both central bank and public perspectives. Furthermore, the chapter addresses the multifaceted challenges associated with CBDC implementation, such as cybersecurity and digital literacy, proposing strategic frameworks for successful adoption. The findings underscore CBDC's capacity to enhance policy efficacy, transparency, and the efficiency of public fund disbursement, offering critical insights for policymakers and future research in the digital finance era.

A Model for Central Bank Digital Currencies: Do CBDCs Disrupt the Financial Sector?

This study examines the effects of Central Bank Digital Currency (CBDC) implementation on monetary policy transmission and financial inclusion using data from 23 pilot programs and 8 full scale implementations spanning 2020 to 2025. Employing synthetic control methods and event study analysis, we assess whether CBDCs enhance monetary policy effectiveness and expand access to financial services. Our findings indicate that retail CBDCs modestly improve interest rate pass through from policy rates to deposit rates, with transmission coefficients increasing by 12% in jurisdictions with active CBDC programs. Financial inclusion effects are substantial in emerging economies, where CBDC adoption is associated with a 7.3 percentage point increase in formal financial account ownership among previously unbanked populations. However, we find evidence of bank deposit outflows averaging 3.2% in the first year following CBDC introduction, raising concerns about financial stability and bank funding costs. Design features matter considerably: interest bearing CBDCs with holding limits demonstrate superior monetary transmission properties while mitigating disintermediation risks. The results suggest that CBDCs represent a potentially valuable addition to the monetary policy toolkit, though successful implementation requires careful attention to design choices balancing multiple policy objectives.