Bruegel - The value added of CBDC

This report provides an overview of central bank digital currencies (CBDCs) and their potential benefits and challenges. It notes that many central banks worldwide are developing a digital equivalent of their sovereign currency, but there is a gap between central banks' motivations for launching CBDCs and the general understanding of what that motivation is. The report discusses the potential welfare implications of introducing retail CBDCs, which remain understudied. It notes that inclusion and protecting consumers from the pitfalls of cryptocurrencies are good societal objectives that can provide visible welfare improvements. However, the case for establishing a retail CBDC is not strong in countries or jurisdictions where financial exclusion is not a first-order problem. The report also notes that the potential benefits of CBDCs for cross-border wholesale purposes are more clear-cut, as they could improve the efficiency and safety of cross-border payments. Finally, the report highlights the importance of carefully considering the design and implementation of CBDCs, as they could have significant implications for monetary policy, financial stability, and privacy.