Central Bank Digital Currency as a New Instrument of Monetary Policy

Abstract

Digitalisation increasingly replaces the demand for cash and leads to a privatisation of payment systems. A reflection of this development is a loss of power by the central banks, threatening the efficiency of the current set of instruments. A recently discussed central bank reaction is digital currency. This article discusses the concept, the design options, the implementation into the monetary policy framework and the macroeconomic consequences of a central bank digital currency.