Central Bank Digital Currencies

Today’s societal digitization continues to advance at exponential speeds driven by technology trends. Billions of Internet of Things devices have made their way into our daily lives, but also into healthcare, manufacturing, and supply chains. In contrast, the financial sector still largely operates on legacy infrastructures, where merchants receive their payments long after they released the digital/physical good to the consumer. In addition, the emergence of Decentralized Finance through blockchain technology, and the accumulation of data in private silos, have demonstrated a capacity to impact national sovereignty and monetary transmission channels. Against this backdrop, many central banks have recently started to research and test the issuance of digitally native fiat money – or Central Bank Digital Currencies (CBDCs) – in an effort to redesign the essence and use of physical cash. CBDCs present a broad variety of designs, which translate into manifold techno-legal and standardization policy questions. In this context, this chapter surveys the state-of-the art with specific focus on “retail” CBDCs. In doing so, it provides an overview of candidate architectures, heeds legal impacts and regulatory compliance issues, presents a set of case-studies and touches upon cross-border CBDC challenges.