Do we really need another dollar, euro, pound or yuan? How to create the right ecosystem for a successful central bank digital currency

Abstract

This paper discusses how to translate regulators’ policy needs to align with the needs of other stakeholders in the payments ecosystem. While most of the recent activity (papers, pilots, etc) in the field of central bank digital currency (CBDC) has focused on the potential advantages for central banks and on the technology (ledgers, platforms, etc), a more appropriate starting point is to identify what problems CBDC is intended to solve, especially for the affected stakeholders. At the end of the evaluation, focus on technological solutions should commence only once business and policy goals have been identified. After a quick summary of the motivations for central banks, regulators, governments and policymakers, the paper examines the motivations for the other key stakeholders in the ecosystem — an aspect that has to date been insufficiently examined. The paper then comments on the challenges associated with driving consumer adoption of CBDC, before discussing the microeconomic disincentives for CBDC adoption among commercial banks, alongside the macroeconomic necessity. The paper concludes with some thoughts on how to balance the conflicting interest of the many stakeholders and the lessons one can learn from other large-scale payment initiatives.