Challenges in the Adoption of Retail Central Bank Digital Currency (CBDC)

Abstract

Financial innovation in Digital currency augmented and brought us into the age of Blockchain and crypto currencies. Despite a cautious stance to digital or crypto currencies, Central Bank Digital Currency (CBDC) is considered as a potential solution for central banks across the world to replace fiat currency notes and to counter the growth of crypto currencies. The main motivation for Central Banks is to limit the risk inherent in the global shift to cashless payment as they are responsible for safety of the monetary system. CBDC gives more control over the currency circulation thereby giving more control over monetary and forex system but it also comes with several challenges – both from public acceptance, financial management and technology perspectives. The paper gives a critical view on these challenges and explore how various existing central banks were trying to figure out a potential solutions in their respective jurisdictions. The challenges will help policy makers and central banks in drawing learning experiences from others to overcome regulatory barriers and thereby be able to address them. In this context some there are unsettled questions regarding ethics, privacy, environmental and technological constraints. Being an emerging subject, it is a hot topic amongst academicians considering lot of research gap existing in the subject. With the imminent implementations of CBDCs, it is vital to explore these issues.