Central banks should ensure that they have the capacity to continue to meet their policy objectives in the digital age and it is in this context that central bank digital currency (CBDC) should be evaluated. If designed appropriately, CBDCs could allow central banks to modernize payment systems and future-proof central bank money as the pace and shape of digitalization continues to evolve.
However, the decision to proceed with CBDC exploration and an eventual launch would need to be jurisdiction specific, depending on the degree of digitalization of the economy, the legal and regulatory frameworks, and the central bank’s internal capacity.
A paper from the International Monetary Authority (IMF) proposes a dynamic decision-making framework for a central bank to make decisions under uncertainty. A phased and iterative approach could allow central banks to adjust the pace, scale, and scope of their CBDC projects as the domestic and international environment changes.
The paper does not cover wholesale CBDC. Wholesale CBDC is limited to a set of predefined user groups, typically banks and other members of national payment systems, whereas retail CBDC is widely accessible to the public. The reason for a focus on retail CBDC is that offering digital central bank money to the general population adds a layer of complexity, which warrants extra analysis compared with wholesale CBDC. However, much of this paper can also apply to the process of exploring wholesale CBDC, the authors noted.