ANALYSIS OF THE PROCESS OF ADOPTION OF CBDC BY SELECTED CENTRAL BANKS AND DISCUSSION OF OPPORTUNITIES AND THREATS RELATED TO THIS TECHNOLOGY

Abstract

Background and Objective: In recent years, the financial system worldwide has been influenced by two phenomena. The first one is the growing popularity of cryptocurrencies. The second is the decline in cash transactions in favour of digital payments methods. In response to these developments, central banks considered issuing their own digital currencies. Such money would facilitate payments, promote financial inclusion, and avoid credit risk. The aim of the article is to present the potential impact of CBDC on the financial system and analyse individual banks’ motivation for its introduction.

Materials and Methods: The article is based on reports and working papers published by central banks and international institutions. It employs the method of comparative analysis.

Results: Issuance of CBDC may help countering financial exclusion in countries with a poorly developed banking system. However, the widespread adoption of CBDC could threaten the financial stability through the risk of an inflow of deposits to credit risk free CBDC. The scale of this process and its effects will depend on CBDC holding limit. Increasing the scale of financing commercial banks by central banks does not have to increase the risk for the public sector due to well-developed deposit guarantee schemes. All in all, CDBC will not be the perfect substitute for stablecoins because of lower anonymity and tax issues.

Practical implications: Central banks should consider issuing CBDC. This will enable them to co-create the changing digital payment market and thus increase its reliability and security.

Conclusion and summary: There are many opportunities and threats associated with CBDC issue. A well-designed system has the ability to take advantage of the opportunities and avoid most threats. Designing CBDC properly is one of the main faiths facing central banks.