• Central Bank Digital Currencies are digital forms of a country’s official currency issued by its central bank. Most Central Banks are conducting research and some have initiated projects and pilots, although only a handful of CBDCs have been fully launched. Whereas retail CBDCs are digital equivalents of cash and available to the general public, wholesale CBDCs are more comparable to bank reserves, only accessible by certain financial institutions.
• The Covid crisis, rapid growth in digital money and payment technologies, and geopolitics have accelerated CBDC projects. Proponents of CBDCs, state that they can provide a secure, efficient, and inclusive digital payment instrument and are a tool for sovereignty and financial innovation.
• Detractors, however, have argued that similar user advantages can be brought by other already existing or developing payment technologies. Moreover, they point to various risks carried by CBDCs, from technical and cybersecurity failures to the possibility that CBDCs may infringe on privacy and succumb to abuse by public authorities, or that they may disrupt market funding and threaten financial stability. Most CBDC projects, however, include architectural choices, features and limitations intended to address such risks.
• Even though their advantages in terms of retail user experience are still to be proven, the point that CBDCs can play a role in fostering fintech innovation sounds valid. This includes facilitating the trend towards the tokenization of assets that could, at least in theory, bring disruptions and new possibilities to investment markets.

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