CBDC - implementation and effects on monetary policy transmission

Abstract

The Central Bank Digital Currency (CBDC) is a digital form of the normal paper currency. It has all the properties of paper note currency, it is a store of value and is uniquely identifiable to avoid counterfeit. The CBDC is different from any other forms of virtual currency such as bitcoin owing to it being issued and regulated as a legal tender by the central bank of the country. The supply of the CBDC is controlled by the central bank of the nation. (Consensys, n.d.). CBDC is defined by following three aspects: Digital Assets - CBDC are accounted for in a digital ledger (DLT) which will act as a single source of information. Central bank backed - Just as the existing banknotes claim the central bank, CBDC also represents all its claims against one single central bank. Central Bank Controlled - With the purpose of having one central autonomous system, all the supply and control of CBDC is determined and maintained by Central Banks.