Central Bank Digital Currency (CBDC) — How DLT-systems can boost economic growth

Central banks around the world have been actively exploring the possibility of introducing sovereign digital currencies. Central bank digital currency (CBDC) is the digital alternative to cash that many policymakers are proposing to engage with the ongoing digitalization of payment means.

We have collided most of the publicly available information in this timeline highlighting the efforts taken by Central Banks worldwide acknowledging the great opportunities that DLT offers to improve inefficient processes and the value it brings considering salient risks and limitations.

Due to the rapid and escalating digitization process, institutional players are starting to explore and adopt innovative digital means of payment. The debates on CBDC cover broad issues, such as their possible impacts on banks’ fund intermediation, liquidity crises, and the transmission mechanism of monetary policy.

At the core of these developments, the emergence of Distributed Ledger Technologies (DLT) has driven discussions around the future of financial markets infrastructure and the possibilities of this technology to solve the aforementioned issues.

Given DLT’s potential to address long-standing challenges such as financial inclusion, payment efficiency, payment system operations, traceability, and cyber resilience, many central banks have spurred CBDC as the application of blockchain technology to the issuance of digital currency.

According to a recent report of the World Economic Forum (2019), there are currently at least 40 central banks…