Central Banks “Envision the CBDC Ecosystem,” Like It a Lot
As we noted last week, the BIS and seven major central banks have advanced global CBDC policy with three new reports evaluating key design features. None of these central banks, including the Fed, has agreed to CBDC, but each has accepted conclusions which appear bound to propel most if not all of them soon to active CBDC development. This FedFin analysis thus assesses each of the BIS reports, all of which focus on retail-facing CBDC, which faces the most challenging operational, policy, and social-welfare questions. All of the reports not only assess critical policy questions ranging from consumer impact to systemic risk, but also reach conclusions that often reject suggestions that CBDC is unnecessary in friction-free banking systems or poses undue intermediation, bank-profitability, illiquidity, or financial-stability risk. Where problems are identified, the reports often proffer solutions to them, noting that risk analysis must not only consider the risks posed by CBDC, but also those that would result without it given the certain evolution of private digital currency.