International Monetary Fund (IMF) published the first installment of the Central Bank Digital Currency (CBDC) Virtual Handbook
It is a reference guide for policymakers and experts on developing CBDC frameworks.
- Eleven countries have already launched CBDCs while around 130 countries, representing 98% of global GDP, are exploring them.
What is the CBDC ?
- CBDC is the legal tender issued by a country’s central bank in a digital form.
- CBDC can contribute to the efficiency and stability of domestic and international payment systems
- RBI has launched the pilot of CBDC in both wholesale and retail segments.
Guideline given for central bank for adopting CBDC in Handbook
- Dynamic decision-making approach that is adaptable, iterative, and responsive to rapidly changing landscape.
- Should establish a clear view of macro-financial risks due to CBDC.
- Should identify key stakeholders and prepare a strategy to engage with them.
- Robust institutional, legal, and technological safeguards should be adopted to protect user privacy
while ensuring compliance with anti-money laundering standards.
Need for CBDCs
- Will enable a more real-time, cost-effective seamless integration of cross-border payment systems.
- Will reduce costs associated with physical cash management.
- Will promote financial Inclusion and establish a cashless society.
- Will safeguard the trust in the national currency vis-àvis proliferation of crypto assets.
Challenges to the CBDC ecosystem include
- cybersecurity risks,
- bank disintermediation,
- privacy issues, etc.