Within just a few years, central bank digital currencies (CBDCs) are expected to become an economic reality for millions of people in dozens of countries around the world.
By the start of 2023, 114 countries or currency unions, representing 95% of global GDP, were exploring – or implementing – a CBDC.1 In the build-up, the focus has shifted decisively from investigation and experimentation to the definition of a broad set of use cases for CBDCs that could result in major benefits for business, society, and individuals.
There is no universal case for a CBDC; each country has a different set of priorities and aspirations for this state-backed digital equivalent of cash. For some countries, the main impetus comes from a responsibility to ensure that fiat money continues to play its anchoring role in the digital era, against a background of privately issued digital currencies such as cryptocurrencies and stablecoins.
For others, the introduction of a CBDC is seen as the best route to much wider financial inclusion and a broader participation of individuals in the digital economy. Increasing efficiency in payments and lowering transaction costs are other compelling reasons.
In all cases, though, a key enabler of CBDCs is an extra dimension they would bring to legal tender: programmability.