Central Bank Digital Currency Research Articles

OPTIMAL CENTRAL BANK DIGITAL CURRENCY DESIGN FOR EMERGING ECONOMIES

The growth of digitalisation presents the possibility for Central Bank Digital Currency (CBDC) to emerge as a secure and efficient payment method. However, despite the benefits, CBDC implementation needs to be adapted to the capabilities and needs of each country. This study uses meta-strength, weakness, opportunity, and threat (meta-SWOT) analysis to assess the internal strengths and weaknesses, as well as the external opportunities and threats, to determine the most optimal CBDC design for emerging economies. In analysing internal aspects, CBDC allows for an efficient payment system, followed by a more effective monetary policy. Furthermore, the technology creates the possibility to boost financial inclusion and trace many illicit activities. However, to achieve that, high investment costs and privacy issues must be accommodated, followed by technological risks such as the digital divide and electrical outages. Turning to external aspects, growing technology, the network effect, enthusiasm for CBDC, and the impracticality of cash usage have become catalysts for CBDC development. Despite these opportunities, central banks should be wary of the threat of cyberattacks, quickening bank disintermediation, legal issues within their respective countries, and competition with private crypto companies. Altogether, the most optimal CBDC design in emerging economies is retail and wholesale coverage, interest-bearing (wholesale) and noninterest-bearing (retail) remuneration, account-based and token-based paymentsystems, a traceable degree of anonymity, hybrid architecture, a Decentralised Ledger Technology (DLT) ledger system, and domestic and cross-border scope. These results are supported by rigorous examination of global CBDC research and development.

MAPPING CENTRAL BANK DIGITAL CURRENCY LITERATURE: LESSONS FOR GOVERNMENTS AND RESEARCH

CBDC has gained popularity in many countries as a result of technological development. Central banks in a number of nations have been experimenting, piloting, launching, and promoting CBDC. Therefore, this study maps CBDC-related literature using a bibliometric approach and content analysis of the Scopus database. The Biblioshiny R Package was used in this study to analyse 190 documents with the keywords “central bank digital currency”. The analysis focuses on the main information about all documents, analysis of scientific production by areas (journals, authors, and countries), document and keyword analysis, and policy recommendations from the previous literature. The results show that CBDCs have had profound effects on monetary and payment systems, and their development could set the stage for a global central bank. The review also addresses the motivations and advantages of issuing a CBDC, including increasing financial inclusion, enhancing monetary policy, andpromoting efficient digital payments. The analysis also reveals that numerous central banks are investigating the possibility of issuing CBDCs due to the numerous advantages of this form of money. There is a lot of potential for theoretical expansion, contextual coverage, and methodological contributions. Furthermore, some policy recommendations from previous literature and directions for future studies are provided in this study.

Retail CBDC purposes and risk transfers to the central bank

The issuance of retail central bank digital currency (CBDC) involves a transfer of risk from commercial banks to the central bank. Mechanisms that limit the transfer of risk, such as an unattractive interest rate, a quantity ceiling or the non-convertibility of cash and reserves into CBDC, are likely to discourage the use of CBDC as a medium of exchange and thus defeat the purpose of issuing CBDC.

Central Bank Digital Currency (CBDC): An Innovation in E-Payment for Socio-Entrepreneurship

The quantity of electronic currency in circulation within the community experienced a substantial increase between 2017 and 2022. However, the quantity of electronic currency in circulation in 2021 has declined compared to 2020 and 2022. Furthermore, the emergence of central bank digital currency (CBDC) as a digital currency has problems that cannot be avoided; these problems arise from policies or regulations and understanding of the public and business people and are related to the security of digital currency users. The Bank of Indonesia deems it imperative to address this by implementing suitable policies. The policy encompasses digital payments and financial services, including Central Bank Digital Currency (CBDC). Central banks worldwide are encouraged to develop Central Bank Digital Currency (CBDC) to enhance monetary policy effectiveness. The objective is to guarantee financial stability and enhance the effectiveness and resilience of the payment system. This study aims to examine the concept of Central Bank Digital Currency (CBDC) as a novel electronic payment tool for social entrepreneurs. The research approach employed in this study was descriptive qualitative with data forecasting. The findings of this study indicate that Central Bank Digital Currency (CBDC) has the potential to be utilized as a payment instrument by social entrepreneurs.

CEMLA’s survey on central bank digital currencies in Latin America and the Caribbean

In late 2021 and early 2022, CEMLA conducted a thorough survey involving 12 central banks to analyze key aspects related to the potential implementation of a Central Bank Digital Currency (CBDC). The findings revealed prevalent issues and objectives regarding digital payments in the region, as well as promising avenues for central bank involvement. However, it highlighted the challenges of creating a universal CBDC framework due to significant disparities among neighboring countries. Nonetheless, the collaborative research approach promises valuable insights for future efforts. To protect participant anonymity, each country’s responses were anonymized with randomly assigned letters.The survey extensively examined awareness and understanding of CBDCs across diverse stakeholders in Latin American nations, including the general public, corporations, and financial institutions. These insights could shape educational campaigns and communication strategies, enabling policymakers and central banks to effectively share information about CBDCs.Moreover, this research effort sheds light on public perceptions, expectations, and concerns about CBDCs in Latin America. By exploring various dimensions such as awareness, interest, adoption potential, concerns, preferences, and regulatory considerations, the survey offers a comprehensive understanding of the CBDC landscape in the region. This holistic approach provides valuable insights for policymakers, central banks, and stakeholders to navigate the complexities of CBDC implementation effectively and responsibly.

Analyzing consumer perceptions and adoption intentions of central bank digital currency: a case of the digital rupee

PurposeThis paper aims to comprehensively analyze the factors influencing the adoption intentions of the digital rupee, a digital currency, among users in India.Design/methodology/approachDrawing upon the Technology Acceptance Model (TAM), the study examines the relationships between cognitive beliefs (perceived usefulness, perceived ease of use, perceived trust, perceived self-efficacy, perceived cost and awareness), affective belief (attitude) and adoption intention of the digital rupee. The study uses a structured questionnaire to collect primary data from 1,707 respondents, which are then analyzed using structural equation modeling.FindingsThe results indicate that perceived usefulness and perceived ease of use significantly impact users' attitudes toward the digital rupee, as well as their adoption intentions. The findings further reveal that perceived trust, perceived self-efficacy, and awareness positively influence attitude and adoption intention. On the other hand, perceived cost exhibits a negative effect on attitude and adoption intention. These results provide empirical evidence on the factors that shape users' attitudes and intentions toward adopting the digital rupee.Research limitations/implicationsThe research methodology used in this study ensures rigorous data collection and analysis. The structured questionnaire enabled the collection of detailed information from a large sample of respondents, allowing for robust statistical analysis. The utilization of structural equation modeling facilitated the examination of complex relationships among variables, enhancing the reliability and validity of the findings.Practical implicationsThe study's findings offer practical guidance for policymakers, financial institutions and researchers in shaping digital currency regulatory frameworks, tailored financial services and further exploration of adoption dynamics.Social implicationsThe research has social implications by potentially influencing the way individuals and communities in India engage with digital currencies, impacting financial inclusion and digital economic participation.Originality/valueThis research contributes to the understanding of the adoption of digital currencies in India and provides valuable insights for policymakers, financial institutions and researchers in the field of digital finance and technology adoption.

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

Directed by the net-zero emission goal, the green bond has become an essential financial tool to promote the development of the green economy. However, the greenwashing risk makes it doubtful whether the green bond can play a positive role. Therefore, this study constructs a six-sector dynamic stochastic general equilibrium (DSGE) model to analyze whether the coevolution of central bank digital currency (CBDC) and green bonds can fully play a positive role in promoting the net-zero economy. The results indicate that: (i) Increased CBDC supply has a positive effect on the economy, and also promotes green bond financing and net-zero emissions. (ii) Compared with non-interest-bearing CBDC, the coevolution of interest-bearing CBDC and green bonds is more likely to promote the net-zero economy and enhance the effectiveness of monetary policy. (iii) When the economy is overheating or in recession, the central bank can regulate green bond financing by adjusting the CBDC interest rate to promote a net-zero economy. (iv) The coevolution of interest-bearing CBDC and green bonds will achieve a higher welfare level than non-interest-bearing CBDC. This study provides guidance for the coevolution of CBDC technology innovation and green bond financial innovation.

Development of digital currencies under regulatory attitude in different countries

This paper centers on the advancement of digital currencies in various nations. Since the inception of Bitcoin in 2009, private digital currencies have experienced exponential growth. Since then, countries have increasingly delved into the research and development of central bank digital currency (CBDC), with developing nations currently outpacing developed nations in CBDC progress. With respect to private digital currencies, particularly those symbolized by Bitcoin, countries have generally adopted more cautious regulatory stances and policies. Moving forward, CBDC may become the norm in digital currency. By establishing more equitable bilateral or multilateral payment cooperation systems, regional economies can facilitate the widespread use of CBDC and enhance payment efficiency.

A Critical Review on Future Trends of Digital Currency

In today's world, digital currency has become the most important part of our lives. Banks, the financial sector, and governments are encouraging digital currency exchange, and other online digital money has the potential to transform the financial sector. Through my research on digital currency, I will outline advantages, threats, and possible issues associated with it. When we talk about digital currency, it means more than just currencies. Cryptocurrencies are a part of digital currency. Digital currency includes various forms like cryptocurrencies, virtual currencies, and central bank digital currencies (CBDC). When Bitcoin started in 2009, it caught the interest of tech fans and curious people. A country's Central Bank issues Central Bank Digital Currency (CBDC), which represents a digital form of currency. Unlike cryptocurrencies like Bitcoin, CBDCs are usually supported by the governments and recognized as lawful tender. They represent a digital version of a nation’s official currency, and their purpose is to provide a digital alternative to physical cash but with any opportunity come risks like price uncertainty, Cybersecurity, etc. In December 2023, the Unified Payments interface (UPI) achieved a significant milestone, with over 1,200 crores transactions valued at more than 18 lakh corers, marking a peak in both transaction count and value [1]. Keywords: Cryptocurrency, Banks, Digital currency, CBDC, Bitcoin, Cybersecurity, Unified Payments Interface (UPI).

Cryptocurrency Adoption and Financial Innovation

The advent of cryptocurrencies and blockchain technology has sparked a revolutionary Shift in the financial sector. This study sets out on a wide-ranging investigation to understand the nuanced dynamics, repercussions, and potential future paths of this shifting environment in the UK and USA. The primary goals of the research are to examine how cryptocurrencies affect financial markets and conventional banking systems; to examine how blockchain technology might be used in the financial sector; to assess policy and regulatory considerations; and to predict and plan for the future. This research digs into how cryptocurrencies have revolutionized the banking and finance sectors. Analysis of adoption rates, market volatility, and integration methods sheds light on the changing position of cryptocurrencies in investment portfolios, reconfiguration of asset classes, and coping mechanisms of conventional financial institutions. When looking at the financial sector as a whole, the transformational potential of blockchain technology becomes clear. The advent of DeFi, smart contracts, and asset tokenization offers new prospects to improve financial transactions, increase transparency, and broaden participation in the investment market. The research analyzes cryptocurrencies and blockchain technology from a policy and regulatory perspective. The delicate balancing act between stimulating innovation and guaranteeing consumer protection, market integrity, and financial stability is highlighted by a comparison of the regulatory methods adopted in the United Kingdom and United States, as well as proposals from international organizations. The research identifies potential future paths for these technologies and their implications. Opportunities and challenges that will influence the future of finance emerge, with a focus on central bank digital currencies (CBDCs), sustainable blockchain solutions, and interdisciplinary collaborations. As this deep dive comes to a close, the transformational power of cryptocurrencies and blockchain technology is highlighted. It sheds light on the forces that are altering the structures of the world’s financial markets, conventional banking structures, and regulatory frameworks. The findings and critical assessment stress the need for well-considered choices, ethical innovation, and interdisciplinary cooperation in order to succeed in an ever-changing environment. To further democratize access, improve transparency, and reshape the economic fabric of our planet, the future of finance resides at the confluence of tradition and innovation, where cryptocurrencies and blockchain technology exist. Cryptocurrency adoption has catalyzed changes in consumer behavior and investment patterns. While some view digital currencies as speculative assets, others embrace them as alternative forms of money and store of value. This diversity of perspectives underscores the need for a nuanced understanding of cryptocurrency adoption and its implications for financial systems. The significance of this study lies in its contribution to our understanding of the evolving relationship between cryptocurrency adoption and financial innovation. By elucidating the drivers, challenges, and implications of this phenomenon, policymakers, industry stakeholders, and researchers can make informed decisions to harness the transformative potential of digital currencies while mitigating associated risks. Cryptocurrency adoption and the financial innovations it has spurred are transforming the way we think about money and financial services. While challenges remain, the potential benefits of a more decentralized, efficient, and inclusive financial system are significant. As the technology matures, regulatory frameworks adapt, and user confidence grows, cryptocurrency adoption is likely tocontinue its upward trajectory. Cryptocurrency adoption and its associated financial innovations have the potential to usher in a paradigm shift in the way we manage and exchange value.

A Macroeconomic Model of Central Bank Digital Currency

We develop a quantitative New Keynesian DSGE model to study the introduction of a central bank digital currency (CBDC): government-backed digital money available to retail consumers. At the heart of our model are monopolistic banks with market power in deposit and loan markets. When a CBDC is introduced, households benefit from an expansion of liquidity services and higher deposit rates as bank deposit market power is curtailed. However, deposits also flow out of the banking system and bank lending contracts. We assess this welfare trade-off for a wide range of economies that differ in their level of interest rates. We find substantial welfare gains from introducing a CBDC with an optimal interest rate that can be approximated by a simple rule of thumb: the maximum between 0% and the policy rate minus 1%.

Navigating the digital frontier: a comparative examination of Central Bank Digital Currency (CBDC) and the Quantum Financial System (QFS)

In the global financial landscape, a transformational shift towards digitization is known, and a comparative analysis of two key components is of particular relevance: central bank digital currency (CBDC) and quantum financial system (QFS). This article explores the dynamic relationship between traditional monetary instruments and new digital currencies, considering the transformative impact and regional nuances of CBDC. The article provides a historical overview of the evolution of the development and implementation of CBDC in the world, analyzes the key factors affecting its implementation in different regions, identifies key technological advances that are the disruptive force of QFS, as well as their impact on the transformation of traditional financial transactions. In the context of the development of CBDC and QFS, the legal frameworks that regulate their work, facilitate or hinder their broad integration into existing financial systems, their impact on traditional monetary policy and, accordingly, on economic stability, inflation and interest rates, and the format of the technological infrastructure are determined, which must be ensured for their successful implementation and operation, as well as the main challenges related to this and ways to solve security and privacy problems in their application. The paper combines qualitative and quantitative analysis to provide a comprehensive and validated dataset for a thorough understanding of digital financial paradigms. Qualitative research was conducted based on structured interviews with experts in the development and implementation of CBDC and QFS, as well as reporting and analytical information on central banks, regulators, and other financial institutions. The empirical study is based on the built OLS model, which describes the dependence coefficient using CBDC (the share of the population that uses it) on the traditional interest rate set by the central bank (taking into account the corrections for the possibility of variation of its changes and unobservable factors). The Python programming language with R libraries and the Stata software package are used for modeling. Tests confirmed the model’s statistical significance and high R-squared value (0.756 ) to begin its ability to explain a significant portion of the variability in CBDC adoption rates. The results showed that, on average, per skin unit increase in the traditional interest rate, post-CBDC rate growth is expected to be 1.74%; when the conventional interest rate is zero, the settlement rate after CBDC is 11.14%. The results of this study can be used to predict the dynamics of public perception of digital currencies. In addition, central banks can adjust interest rates to stimulate or moderate the adoption of CBDCs based on broader strategic macroeconomic measures: 1) during economic downturns, higher interest rates can be used to stimulate the adoption of digital currencies as an alternative financial instrument; 2) during periods of economic growth, interest rates may be lowered to mitigate the intended overheating of CBDC adoption.

The rise in popularity of central bank digital currencies. A systematic review.

Central bank digital currencies (CBDCs) have been growing in popularity since 2018, as worldwide countries explore their impact and implementation options. This article analyzes the state of research around central bank digital currencies and the evolving landscape of CBDCs, and explores emerging areas of research and trends by using the PRISMA method and VOSviewer, with the goal of showing the main opportunities and challenges related to them. AMSTAR, DistillerSR, Eppi-Reviewer, ROBIS, and SRDR were the screening and quality evaluation tools employed for study eligibility criteria, design screening and content selection, text analysis data extraction, methodological quality predictors, and reliable and reproducible evidence assessment. A total of 1024 articles on central bank digital currencies were identified in Scopus and the Web of Science, out of which 747 have been included in the review (documents which were not in English language and not categorized as journal articles were excluded). Through an analysis of the relevant literature, the study categorizes CBDC research into positive, negative and neutral research, with a particular focus on sustainability issues, and conducts a keyword co-occurrence analysis using VOSviewer, following a narrowing down of the relevant articles to be included in the study by applying the PRISMA framework. This generates an overall view for experts and researchers who can use the main analyzed features of CBDCs and adapt them accordingly, taking into account relevant macroeconomic characteristics. The study highlights the need to continue interdisciplinary research, by adapting the research and CBDC characteristics to keep up with the latest technologies and with the shift towards green finance, and explores the elaborate relationship between finance, technology and sustainability.

Перспективы трансформации системы международных расчетов в Российской Федерации на базе цифровых валют центральных банков

Fragmentation of the global financial and economic space and difficulties in the organization of international settlements cause the restructuring of the international settlement system of the Russian Federation. Russia’s need for a reliable system of international settlements is due to its rapid involvement in the system of international trade, the need for high-tech imports, sales of raw materials and high-grade goods. One of the most promising options for a new design of payment infrastructure protected from sanctions pressure is the creation of an international payment system based on the peer-to-peer model using central bank digital currencies (CBDC). The Committee on Payment Infrastructures is actively theorizing this model. To date, the Russian Federation (digital ruble) and the People's Republic of China (digital yuan) demonstrate a high level of readiness to make settlements in the CBDC. The creation of a payment system based on CBDC fundamentally changes the entire landscape of international settlements, not only reducing the cost of transactions, but also ensuring their reliability, transparency and protection from the negative influence of other countries. Of particular interest is the model of clearing using CBDC in BRICS countries, which will allow for centralized netting of mutual positions of the countries in national currencies and gradual displacement of currencies of developed countries from mutual settlements.

Financial Stability Implications of CBDC

A Central Bank Digital Currency (CBDC) is a form of digital money that is denominated in the national unit of account, constitutes a direct liability of the central bank, and can be distinguished from other central bank liabilities. We examine the positive and negative implications for financial stability of a CBDC under different design options. We base our analysis on the lessons derived from historical case studies as well as on analytical frameworks useful to characterize the mechanisms through which a CBDC can affect financial stability. We further discuss various policy tools that can be employed to mitigate financial stability risks.

Central Bank Digital Currencies in the Middle East and Central Asia

Central Bank Digital Currencies in the Middle East and Central Asia

Digital Currencies: Is Africa Ready?

Digital currencies are likely to modify the way businesses, people and governments transact in Africa. Nonetheless, several factors need to be assessed before the wide adoption of digital currencies in the continent. These factors include the regulatory environment for fintech, the condition of digital infrastructure and the degree of financial inclusion. This paper assesses the readiness of African countries for the issuance of digital currencies. The paper gives an overview of the African countries that have implemented or are considering implementing digital countries. It discusses the issues to be considered for a conducive environment to launch digital currencies. It explores the opportunities and challenges of developing and issuing digital currencies in Africa. The paper finds that although the developed mobile money network infrastructure, high mobile money penetration, the growth of the digital economy and high degrees of financial exclusion position Africa well for the adoption of central bank digital currencies (CBDCs), several challenges need to be addressed. These encompass lower levels of financial inclusion, digital exclusion, the digital divide, poor digital infrastructure and regulatory uncertainty. The paper provides recommendations for improving the prospects of digital currencies in Africa. These include the creation of a legal and regulatory framework for digital currencies, investing in digital infrastructure, improving internet connectivity and educating citizens on digital currencies. Digital currencies can lead to improved economic growth, increase cross border payments, promote financial inclusion and sustainable development Keywords: Africa, Digital Currencies, Digital Infrastructure, Financial Inclusion, legal, regulatory environment

Evolution of CBDC in the Context of the Institutional Theory of Money

There is currently a lot of discussion about the economic essence and differences between cryptocurrencies and other forms of digital money. An analysis of modern forms of money interpretations within national and international financial institutions also showed that approving an established typology is premature. The article proposes to look at the process of evolution of money from the point of view of the institutional theory of money. Accordingly, the variety of modern forms of money is due to varying degrees of control over the possibilities of issuing and establishing the rules for the functioning of money on the part of the payment community. Suppose the emergence of cryptocurrencies makes it possible to include a large part of the payment community in the decision-making process about the future of the payment system. In that case, central bank digital currencies (CBDCs) are, on the contrary, the highest form of alienation of the payment community, in which all questions of the existence of money are concentrated in the hands of the Central Bank. Even the existence of the banking system, traditionally involved in money circulation, becomes unnecessary. At the same time, the authors also examine the positive consequences of the gradual implementation of blockchain-based central bank digital currency in the Russian public procurement system.

CONCEPTUALIZING FINTECH'S IMPACT ON BANKING: A COMPARATIVE STUDY OF THE USA AND NIGERIA

This paper presents a comprehensive review of the impact of Financial Technology (FinTech) on the banking sectors in the United States (USA) and Nigeria, offering a comparative analysis to understand the differential effects and integration strategies of FinTech across these two distinct economic contexts. Through an extensive literature review, the paper synthesizes findings from previous studies, reports, and industry analyses to outline the key dimensions of FinTech's influence on banking, including operational efficiencies, customer service innovations, regulatory challenges, and the broader implications for financial inclusion.
 In the USA, the paper highlights how FinTech has driven significant advancements in banking through technological innovation, regulatory support, and a strong emphasis on customer-centric services, leading to enhanced operational efficiencies and competitive market dynamics. Conversely, the analysis of the Nigerian banking sector reveals a burgeoning FinTech landscape that, despite facing infrastructural and regulatory hurdles, has made notable strides in promoting financial inclusion and democratizing access to financial services.
 The comparative study underscores the critical role of regulatory frameworks, technological infrastructure, and market maturity in shaping the impact and adoption of FinTech solutions. It concludes that while FinTech presents transformative potential for the banking industry globally, its effective integration and sustainable growth are highly dependent on tailored strategies that consider the unique socio-economic and regulatory environments of each country. The paper calls for a collaborative approach among policymakers, financial institutions, and FinTech companies to foster environments that support innovation while ensuring financial stability and consumer protection. By drawing lessons from the comparative analysis of the USA and Nigeria, the study offers valuable insights for other countries navigating the complexities of FinTech integration into their banking sectors.
 Keywords:  FinTech, Banking Sector, USA, Nigeria, Evolution, Impact, Comparative Analysis, Future Trends, Policy Recommendations, Financial Inclusion, Innovation, Regulation, Cybersecurity, Digital Divide, Collaboration, Financial Literacy, Artificial Intelligence, Blockchain, Biometric Authentication, Internet of Things, Quantum Computing, Central Bank Digital Currencies.

Connectedness between central bank digital currency index, financial stability and digital assets

This study examines the interconnectedness between central bank digital currencies (CBDC) index, digital assets and financial stability. First, we use the CBDC index as a measure of financial stability and examine its connectedness with other known measures of financial stability used in the literature. Secondly, we analyse the connectedness of CBDC index with digital assets such as cryptocurrencies and non-fungible tokens and various measures of financial stability. By analysing index returns of CBDC data and applying various connectedness measures to CBDC index, cryptocurrencies, stablecoins and NFTs, we gain insights into the relationships among these assets within a framework. The findings reveal a significant level of connectedness between CBDCs index, digital assets and financial stability. Our analysis shows a weak positive connectedness between CBDCs index and digital assets, indicating that movements in the CBDC index are not closely related to the performance of various digital assets and have a very small contribution to the changes in the returns of digital assets. Furthermore, the study finds bidirectional connectedness between CBDCs and other financial stability measures, suggesting that changes in CBDC performance can influence the overall stability of the financial system, and vice versa. This highlights the importance of carefully considering the design and implementation of CBDCs to ensure they support financial stability objectives.