CBDCs: The Digital Transformation of the Global Monetary System

Financial institutions and governments around the world are exploring the possibilities offered by Central Bank Digital Currencies (CBDC). These systems represent a significant evolution in the way we conceptualize money and transactions in the digital age. Unlike decentralized cryptocurrencies, CBDCs are issued and guaranteed directly by sovereign central banks, with a value backed by the national fiat currency.

What Advantages Do CBDCs Provide?

The development of these digital coins aims to address multiple challenges of the current financial system. Firstly, they significantly reduce the operational costs of complex financial infrastructures. International transactions become more efficient and cost-effective, eliminating unnecessary intermediaries and their associated costs.

For people without access to traditional banking services, CBDCs represent a gateway to financial inclusion. They offer money transfer options with reduced fees and greater accessibility. Additionally, strengthening financial security and providing greater privacy in transactions are central objectives of these initiatives.

Two Models of CBDC: Wholesale and Retail

CBDCs are divided into two categories based on their users and functions. Wholesale CBDCs are designed for financial institutions and operate similarly to maintaining reserves at a central bank. Their primary function is to manage liquidity among banks and facilitate interbank settlements. Through these platforms, financial intermediaries can access monetary policy tools that the central bank makes available to regulate borrowing rates and influence interest rates.

Retail CBDCs, on the other hand, are intended for use by businesses and consumers. They provide a stable means of exchange backed by the State, avoiding risks arising from private intermediaries. These come in two variants: token-based, which function like traditional digital cash, and account-based, which require identity verification of those participating in the transaction.

Impact on Financial Stability and Inclusion

A relevant benefit of retail CBDCs is the mitigation of systemic risk. By eliminating certain intermediaries, the probability of events such as bank runs triggered by the insolvency of private issuers is reduced. The structure backed by central banks provides institutional confidence to users.

At the international level, these digital coins can transform the way cross-border payments are executed, reducing time and costs. For countries with unbanked populations, they represent a practical solution to expand access to financial services without the need to build costly physical banking infrastructure.