What could a central bank digital currency look like in the euro area? The outcome of a hackathon exercise

Abstract

Central bank digital currency (CBDC) has become a widely discussed subject in central banking. Most of the literature, however, has been theoretical, and there exists no precise description of what a CBDC could look like in a major economy. The Bank of Finland conducted an internal hackathon exercise to shed more light on the practical questions of a CBDC. This paper presents the findings of that exercise. It is a model of a CBDC for the eurozone, and it attempts to approach the question from an operational point of view. The model is not a suggestion, and it probably omits many important considerations. However, by presenting one possible description of a CBDC, it contributes to the policy discussion and provides a practical reference that exemplifies the degree of complexity that central banks will be facing when considering the issuance of a CBDC.