Exploring the Potential of Central Bank Digital Currency: A Guide for Central Banks

The digitalization of the economy presents both challenges and opportunities for central banks. To ensure the achievement of their policy objectives in the digital age, central banks should have the capability to adapt. One potential solution is the implementation of central bank digital currency (CBDC). CBDCs, if designed properly, have the potential to modernize payment systems and safeguard central bank money as digitalization continues to progress. However, the decision to explore and eventually launch CBDCs should be based on the specific circumstances of each jurisdiction, taking into consideration factors such as the level of digitalization in the economy, legal and regulatory frameworks, and the internal capacity of the central bank. This paper suggests a dynamic decision-making framework that enables central banks to make informed decisions in uncertain situations. By adopting a phased and iterative approach, central banks can adjust the pace, scale, and scope of their CBDC projects in response to changes in the domestic and international environment.

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