We compiled extensive research and examine the multifaceted landscape of digital currencies, focusing on central bank digital currencies (CBDCs) and decentralized finance (DeFi). They explore the motivations behind CBDC development, their potential impacts on cross-border payments, financial inclusion, monetary policy, and financial stability, while also considering the associated technological, legal, and regulatory challenges. Furthermore, the texts analyze the transformative potential and inherent risks of DeFi, comparing it to traditional finance and addressing issues like interoperability, operational risks, and regulation. Competition among digital currencies, including the potential impact of CBDCs on established reserve currencies, is also a key theme across these documents.
Frequently Asked Questions on Central Bank Digital Currencies (CBDCs) and Cryptoassets1. What is a Central Bank Digital Currency (CBDC)?2. What are the main motivations for central banks to explore or issue CBDCs?
3. What is the current state of central bank involvement with CBDCs and cryptoassets globally?
4. How are central banks assessing the potential use of stablecoins and other cryptoassets?
5. What are the different models for cross-border CBDC payments being considered?6. Do central banks see value in having both a Fast Payment System (FPS) and a general-purpose CBDC?7. What economic factors influence a country's likelihood of engaging with CBDC projects?8. How might the introduction of CBDCs by major economies affect currency competition and the role of cryptocurrencies?
The provided sources collectively paint a picture of significant and ongoing exploration into the realm of CBDCs. Central banks are driven by a desire to improve payment systems and adapt to the evolving digital financial landscape. The potential for mCBDC arrangements to revolutionize cross-border payments is a key area of focus. Simultaneously, the rise of cryptocurrencies and DeFi presents both opportunities and challenges, influencing the motivations and design considerations for CBDCs. Theoretical models are crucial for understanding the economic dynamics of currency competition in this new environment, and policymakers must carefully weigh various policy considerations to ensure that CBDC implementation serves the broader public interest.
