The value added of central bank digital currencies

Central bank digital currencies (CBDCs) are reshaping the financial landscape globally. Already implemented in ten countries, including Nigeria and several in the Caribbean, CBDCs offer inclusive digital payment solutions, particularly beneficial for regions with limited access to traditional banking systems. However, in more advanced financial systems, CBDCs may appear less compelling, with existing alternative digital payment methods already prevalent for retail customers. By contrast, there may be a strong case for building a CBDC that banks could use for cross-border wholesale purposes (i.e. with other currencies). The euro area and the United States might wish to consider carefully how wholesale CBDCs might affect their global economic standing from a geopolitical perspective. By developing a CBDC for wholesale purposes, the European Union could contribute to developing the global standard.

Relevant documents:

• Demertzis, Maria, and Catarina Martins, 2023. The value added of central bank digital currencies: a view from the euro area, Bruegel Policy Brief, June.
• Niepelt, Dirk, 2023. Digital Euro: An assessment of the first two progress reports, SUERF Policy Brief No 612, June.
• Niepelt, Dirk, 2023. Digital Euro: An assessment of the first two progress reports, European Parliament In-Depth Analysis, April.
• ECB Occasional Paper, No 286, 2021: Central Bank Digital Currency: functional scope, pricing and controls
• BIS, Innovation Hub Other, May 2023: Central bank digital currencies: ongoing policy perspectives
• BIS Annual Economic Report 2023, Chapter III: Blueprint for the future monetary system: improving the old, enabling the new
• Press release, 28 June 2023, EC Brussels: Single Currency Package: new proposals to support the use of cash and to propose a framework for a digital euro