5. Central Bank Digital Currencies and Cryptocurrencies

We briefly described the potential impact of Central Bank-issued cryptocurrencies in Chapter 2. In this chapter, we explore the emerging trend for central banks to experiment with digital versions of fiat currencies and cryptocurrencies. We discuss the opportunities presented by cryptocurrencies for central banks and individuals, together with the risks. We explore the possible impacts to existing commercial banking systems and why the structure of government, central banks, regulators and commercial banking in different countries creates more or less challenging environments for the issuance of Central Bank Cryptocurrencies/Digital Currencies (CBCCs, or CBDCs as we use in this book). We present alternative models with greater or lesser involvement of central and commercial banks and discuss the pros and cons.