Retail Central Bank Digital Currencies or “CBDCs” are hot right now with estimates that as many as 80% of the world’s central banks are engaged in pilots or other activities.  The Bank of England, the European Central Bank and the U.S. Federal Reserve are all publicly exploring their use cases while China has unveiled its digital yuan ahead of the Beijing Winter Olympics.  But, depending on how they are designed and implemented, retail CBDCs could fundamentally change how we think about money and interact as consumers with the financial system.  There are a number of legal issues that CBDCs could cause for today’s banking ecosystem so should banks and payment services providers be worried?

Why have a CBDC?

Financial services are changing at an unprecedented rate with the use of new technologies speeding up payments and giving consumers greater access to a wider range of services through their phone. But despite this, little has changed in terms of the basic rails that underpin the banking and payments landscape. 

The emergence of cryptocurrencies and distributed ledger technology opened up new possibilities to fundamentally alter that landscape but progress has been hampered by issues including price volatility, privacy and interoperability. The emergence of stablecoins has seen a potential leap forward in addressing particularly the first of those challenges, but still relies heavily on an exchange of value with fiat currencies. 

“A solution in search of a problem?”

Issues that CBDCs could create

Next steps