CBDCs¶
A central bank digital currency is a digital central-bank liability designed for payment or settlement. The term covers different systems. A wholesale CBDC used among financial institutions and a retail CBDC offered to the public have different users, risks, and policy goals.
Retail and wholesale models¶
Wholesale systems target interbank settlement, securities delivery, or cross-border coordination. Retail systems target households and businesses. A central bank may operate accounts directly, use intermediaries for wallets and compliance, or issue token-like claims transferred through authorized systems.
Digital bank reserves already exist. A CBDC changes access, technical design, or settlement arrangements rather than inventing digital central-bank money from nothing.
Architecture choices¶
Design questions include who operates the ledger, who onboards users, whether payments work offline, how intermediaries reconcile, what limits apply to holdings, and how recovery works. A distributed ledger is optional. Central-bank authority, not the database structure, defines the liability.
Programmable payments can mean ordinary conditional payment interfaces. Programmable money would place restrictions in the asset itself. Public proposals differ, so claims about expiry, spending categories, or automatic taxation must cite the actual design rather than the CBDC label.
Privacy¶
Cash permits transactions without a central transaction log. A retail CBDC can expose more data to intermediaries or authorities depending on identity, ledger, and access design. Tiered wallets, offline transfers, separation of identity from transaction processing, and legal access controls can reduce exposure. They do not create the same physical anonymity as cash in every scenario.
Privacy is partly technical and partly institutional. Audit logs, warrants, retention, operator access, and data-sharing law determine what happens to records the system can produce.
Monetary and operational risk¶
Easy movement from bank deposits into a central-bank liability could accelerate withdrawals during stress. Designs may use holding limits, tiered remuneration, or intermediary funding arrangements. Central operation also creates availability, cyber, and governance concentration that needs offline and recovery planning.
Further reading¶
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