CBDCs at the Crossroads: Seizing Opportunities and Confronting Threats in the Financial Frontier

This book chapter thoroughly investigates the discourse on digital currencies, focussing on virtual currencies like Bitcoin and their implications for international trade. The study emphasizes the necessity to explore the domestic aspects of payment intermediation and how these influence the integration of digital currencies into international trade, given the shift towards technological advancements and declining cash transactions. The competitive relationship between digital currencies and traditional money is analysed, highlighting their challenges to governmental oversight. The research explores numerous factors, including trust, credibility, volatility, and the impact of geographic and cultural elements on trade. It also considers the potential disruption to established economic systems and the central bank’s role as a lender of last resort. The study employs a balanced approach to assess the opportunities and threats presented by digital currencies and concludes with a varied outlook based on the weights assigned to these factors. The findings highlight the need for informed decision-making in digital currency transactions and contribute to the broader understanding of their integration into the international financial system. The chapter enriches the discourse on digital currencies by analysing their role in trade and the evolving payment processing landscape.