The Potential Impact of Central Bank Digital Currencies (CBDCs) on Economic and Financial Sector Development

Central bank digital currency (CBDC) is a central-bank issued digital currency or “digital banknote” which is programmable and could be transferred peer-to-peer via the blockchain technology. This paper studies several design types of CBDCs according to their implementation model (retail vs wholesale), underlying format (account-based vs token-based) or their distribution model (direct, indirect or hybrid). The analysis focuses on the potential impacts of the different CBDCs design types on the major financial sector actors, as well as on the financial sector development in general. The programmability of CBDCs to include smart contracts is found to be a powerful factor that could foster innovation and efficiency improvements in the financial sector. Major concerns are related to a potential disintermediation in the financial sector as a result of the introduction of CBDCs.