Reasons Fostering or Discouraging the Implementation of Central Bank-Backed Digital Currency: A Review

Abstract

This study analyses the current debate around central bank-backed digital currency (CBDC). A comparative study was carried out considering countries for and against implementing a CBDC and their reasons, looking for common causes, differences, etc. The conclusion was that there are opposite tendencies between defenders and detractors of establishing a CBDC. However, today—and taking into account the positions of three large banking institutions (the Federal Reserve of the United States of America, the Bank of Japan and the Bank of England) on establishing (at least in the short term) a CBDC)—it seems that large-scale implementation is still far off. On the contrary, the Chinese Central Bank and banking systems of other countries that have less weight in the world, such as Uruguay, Lithuania and the Bahamas, seem to go against the trend of rejection and are seriously considering its implementation. Although this matter has been dealt with in the theoretical field, more pilot tests such as the one carried out by Uruguay are necessary in order to understand specific effects on the economy, on one hand, and on acceptance of its use by the population, on the other.

Central Banks Digital Currency: Detection of Optimal Countries for the Implementation of a CBDC and the Implication for Payment Industry Open Innovation

“…According to [9], once a country with great global weight (as is the case of China) takes a step forward and decides to establish its own CBDC, many others would at least study the phenomenon further and even decide to implement their own CBDC (as has been the case of the Bahamas). The attention that is being paid, whether by central banks, monetary areas, or citizens themselves, has only increased, as [27] points out by analyzing Internet searches on CBDCs.…”

“…First, we start with the motives (and the variables associated with them) for implementing a CBDC for each country, which will serve as input for the model. To this end, we start from the information available on the motives that drive a country to establish a CBDC, based on that collected by [9,26], complemented by the speeches issued by central banks and information also collected by [27]. Based on the above, the motives present in central bank speeches, reports or briefing notes and the variables associated with them have been selected, as shown in the following table (see Table 1).…”

“…The relative motive for implementing a CBDC as consumer protection is determined by the reason that the more online commerce there is, and the more payments made in this way, the more "digital" protection the consumer will need, and the UNCTAD B2C E-commerce Index [32] has been used as a variable for this purpose. Other central banks have put forward as a reason for implementing CBDCs the power to maintain control over monetary and macroeconomic policy [9], so to measure this, we have turned to the speeches of governors or members of central banks, reports or technical notes alluding to this specific reason, with its presence or absence in the item analyzed as the variable used. The more mobile payment is used or cryptocurrencies are available to the public without a Central Bank alternative, the more risk there is that other forms of payment not controlled by the Central Bank, such as Bitcoin, Ripple and other cryptocurrencies, will be used, and the more difficult it will be to control monetary policy.…”

“…The different studies and debates currently revolving around the possible implementation of a CBDC had their origin (as we have already commented in the introduction) in the emergence of Bitcoin and other cryptocurrencies (such as Ripple, Ethereum or Litecoin among others) that, in theory, can perfectly compete with the physical money issued by a central bank [3,7], or as [8] points out, "Libra is going to challenge the current banking ecosystem". It should also be considered that traditional cash is costly, as its issuance, circulation and withdrawal require costly infrastructure for the central bank and commercial banks [9]. It also generates crime (theft) and counterfeiting [10], and is also the main vehicle for money laundering, tax evasion and terrorist financing [11].…”

“…CBDC" (2013-2020) annual average of the period. Search Interest topic "CBDC" (2013-2020) annual average of the period Source: Own elaboration based on[9,[27][28][29][30][31][32]35].…”