Central Bank Digital Currencies: Motives, Economic Implications, and the Research Frontier

In just a few years, central banks have rapidly ramped up their research and development efforts on central bank digital currencies (CBDCs). A growing body of economic research informs these activities, often focusing on the "reserves for all" aspect of CBDCs for retail use. However, CBDCs...

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Bibliographic Details
Published in:Annual review of economics 2022-01, Vol.14 (1), p.697-721
Main Authors: Auer, Raphael, Frost, Jon, Gambacorta, Leonardo, Monnet, Cyril, Rice, Tara, Shin, Hyun Song
Format: Article
Language:English
Subjects:
Banking
big tech
Borders
CBDC
Central bank digital currencies
Central banks
cryptocurrencies
data privacy
Digital currencies
distributed ledgers
Economic research
Financial systems
JEL C72
JEL C73
JEL D4
JEL E42
JEL E58
JEL G21
JEL L86
JEL O32
Macroeconomics
Monetary policy
money
Privacy
stablecoins
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Summary:In just a few years, central banks have rapidly ramped up their research and development efforts on central bank digital currencies (CBDCs). A growing body of economic research informs these activities, often focusing on the "reserves for all" aspect of CBDCs for retail use. However, CBDCs should be considered in the full context of the digital economy and the centrality of data, which raises concerns around competition, payment system integrity, and privacy. This review gives a guided tour of the growing CBDC literature on the microeconomic considerations related to operation architectures, technologies, and privacy as well as the macroeconomic implications for the financial system, financial stability, and monetary policy. A set of questions, particularly on the cross-border dimensions of CBDCs, remains unresolved and calls for further work to expand the research frontier.
ISSN:1941-1383
1941-1391
DOI:10.1146/annurev-economics-051420-020324