Central Bank Digital Currencies

Central Bank Digital Currencies – An Early State of Play and an Inevitability

Central Bank Digital Currencies (CBDCs) have the potential to be the most pervasive innovation in the digital and payments space which will fundamentally impact all participants in the global financial services industry. A Central Bank Digital Currency is an innovation in the form of money issued as well as the underlying infrastructure on which payments can be transacted.

A CBDC is a digital payment instrument, denominated in the national unit of account, that is a direct liability of the Central Bank (BIS 2020, 3). It is the legal tender issued by the Central Bank in a digital form as a medium of exchange, store of value and unit of account. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency.

Currently, only commercial banks and certain permitted financial institutions can hold Central Bank money in the form of ‘reserves’ while the retail public can hold money issued by the Central Bank only in form of physical bank notes. In its electronic form, CBDCs have the potential to be widely used by wholesale financial institutions, households and businesses to store value and make payments in a more secure way.

With cash usage declining over most economies, CBDCs can play a role in maintaining and streamlining the Central Bank’s function of providing money, financial stability and ensuring continued access in a purely digital economy.

Deloitte industry experts and SMEs present a comprehensive point of view on CBDC, highlighting recent innovations, regulatory challenges and the way forward for stakeholders in Financial Services sector to approach

Key elements of the paper

Benefit, and challenges involved
Highlight some of critical issues, challenges and benefits of implementing CBDC for different participants

Key considerations for regulator
Highlight key factors such as access to end users, issuance, liquidity management, etc. while developing roadmap for CBDC

Use case and underlying technology
Identify use case and underlying technology for CBDC implementation

Case studies focused on APAC
Provide inputs on measures taken by countries in APAC to stay ahead in the CBDC development

Global benchmarking
Highlight the as-is scenario for different countries that have embarked on CBDC implementation journey

Key drivers and risks involved
Provide inputs on innovation and disruption in digital payments, benefits and challenges involved

Nearly 90% of central banks are actively engaging in some form of work on CBDC