The Economics of Central Bank Digital Currency

In this paper, The European Central Bank provides a structured overview of the burgeoning literature on the economics of CBDC. The research documents the economic forces that shape the rise of digital money and reviews the motives for the issuance of CBDC. Furthermore, the implications for the financial system are studied, together with a number of policy issues and challenges. While the academic literature broadly echoes policy makers’ concerns about bank disintermediation and financial stability risks, it also provides conditions under which such adverse effects may not materialize. There are several knowledge gaps that merit further work, including data privacy and the study of end‐user preferences for attributes of digital payment methods.