Market & Topical Perspectives

Central Bank Digital Currency: Disrupting the Disruptors

Central Bank Digital Currency: Disrupting the Disruptors

While the increasing participation of mainstream financial players in the crypto space has helped fuel its expanded acceptance, national authorities generally have been less responsive. This tide appears to be changing, however. In addition to considering a range of regulatory and oversight frameworks for cryptocurrencies, many central banks are studying the feasibility of issuing some form of digital currency of their own, determined not to be undermined by decentralized peer-to-peer networks that operate free from their authority. 

Key Takeaways

  • Key-Takeaway

    The explosive growth of cryptocurrency markets has prompted central banks to consider the positives and negatives of issuing digital fiat, an effort that took on new urgency with Facebook’s ultimately curtailed entry into the stablecoin space and China’s advancements with its CBDC.

  • Key-Takeaway

    Cash usage—already in decline over the past decade as commerce has increasingly migrated online—took a significant hit from the dislocations of Covid-19.

  • Key-Takeaway

    Policymakers face a host of design choices that likely will influence the domestic adoption of CBDCs as well as its impact on the global monetary and financial systems.

  • Key-Takeaway

    Though privately issued crypto does not appear poised to challenge the supremacy of national fiat, the technology upon which these platforms are built may support a range of applications for central banks and other policymakers. Implementation is not without risk, however.