Central Bank Digital Currencies: Impact on Banking
Analyze how CBDCs are reshaping monetary systems and their implications for commercial banks.
Central Bank Digital Currencies (CBDCs) represent a fundamental shift in monetary systems, with central banks worldwide exploring or piloting digital currency initiatives. CBDCs offer benefits including faster cross-border payments, financial inclusion for unbanked populations, and enhanced monetary policy transmission. However, they also present challenges for commercial banks, potentially disintermediating traditional deposit-taking functions. This comprehensive analysis examines different CBDC architectures including retail, wholesale, and hybrid models. We explore the technology stack powering CBDCs, from distributed ledger technology to centralized databases, and discuss privacy considerations in digital currency design. The article addresses implications for monetary policy, financial stability, and the future role of commercial banks in a CBDC-enabled economy.
