All of the world’s major central banks have begun to examine the potential advantages and disadvantages of developing a new monetary instrument: central bank digital currency (CBDC). Although this new form of money has the capacity to significantly enhance monetary systems by maintaining an anchor of trust for the monetary system, improving financial inclusion, and making the private banking sector more competitive, it has also been heavily criticised for the risks it could pose to financial stability.

This report proposes a CBDC design that would minimise the potential risks to financial stability. It assesses both the benefits of CBDCs and the main implementation risks, and explores how such risks might be mitigated by enabling more precise central bank control over the CBDC’s impact on the financial system.

Published in April 2020 by Positive Money.