This fintech note analyzes the implications of central bank digital currency (CBDC) for monetary policy. It examines how the introduction of CBDCs can affect various aspects of the macroeconomic environment, which in turn influences monetary policy. The note distinguishes between “level effects” and “transmission effects” of CBDC issuance. Level effects refer to the impact of CBDCs on financial conditions, which can either tighten or loosen as a shock. Transmission effects, on the other hand, pertain to how CBDCs alter the consequences of a monetary policy shock on output, employment, and inflation. Generally, CBDCs are expected to have minimal effects on monetary policy transmission during normal times. However, in situations characterized by low interest rates or financial market stress, the effects can be more significant.