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Potential Advantages of Retail Central Bank Digital Currency

Author

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  • Balazs Koczian

    (Magyar Nemzeti Bank)

Abstract

The emergence of central bank digital currency will cause a radical change in the relationship between central banks and users. At present, cash is the only way for users outside the central bank's financial market customer base to hold claims on the central bank. By comparison, central bank digital currency will provide users with a safe, versatile and multifunctional instrument, which will be a novelty in many respects. Central bank digital currency may also provide the option of interest remuneration, through which the central bank's decisions may reach consumers directly. As a result of this, the central bank may achieve its goals more efficiently, and competition may increase in the banking sector. The instrument supports the penetration of new, innovative solutions and broadens the range of customers in the banking sector, while the risks inherent in the introduction of the instrument can be addressed by proper design.

Suggested Citation

  • Balazs Koczian, 2022. "Potential Advantages of Retail Central Bank Digital Currency," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 21(3), pages 149-158.
    • Handle: RePEc:mnb:finrev:v:21:y:2022:i:3:p:149-158
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    File URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-21-3-fa1-koczian.pdf
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    References listed on IDEAS

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    1. Anneke Kosse & Ilaria Mattei, 2022. "Gaining momentum – Results of the 2021 BIS survey on central bank digital currencies," BIS Papers, Bank for International Settlements, number 125.
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