The Bank for International Settlements defines a central bank digital currency as follows: ‘In simple terms, a central bank digital currency (CBDC) would be a digital banknote. It could be used by individuals to pay businesses, shops or each other (a 'retail CBDC'), or between financial institutions to settle trades in financial markets (a ‘wholesale CBDC').’
Central banks that do not introduce their own digital money risk losing the ability to conduct effective monetary policy.
The introduction of a central bank digital currency is unlikely to have major effects on the economy.
In an economy open to capital flows, monetary policy can only be effective with a floating exchange rate.
For emerging and developing economies open to the world capital market, a flexible exchange rate confers little advantage over a pegged exchange rate in terms of economic stability.
The key feature making the US a more natural optimum currency area than the euro area is higher labor mobility.
