CBDCs in Focus: The 15 Essential Questions Steering the Evolution of Digital Currencies

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  • The pivotal 15 questions CBDCs must answer to pave the way for their widespread adoption.
  • These 15 questions span five domains: design, technology, regulation, economics, and social implications.
  • The answers will shape the foundational aspects of these digital currencies, influencing their effectiveness, acceptance, and impact on the global financial ecosystem.

Central bank digital currencies (CBDCs) are poised to revolutionize the landscape of finance and transactions. But there are questions that CBDCs must answer. Sold to the world as the functional equivalent of cryptocurrency, but with government backing, the argument for CBDCs is strong. However, many critical questions must be addressed before these currencies fully integrate into the global economy. These 15 questions span five domains: design, technology, regulation, economics, and social implications. Here are the pivotal 15 questions that CBDCs must answer to pave the way for their widespread adoption.


Central Bank Digital Currencies (CBDCs) are digital forms of a country’s fiat currency issued and regulated by the country’s central bank. Unlike cryptocurrencies such as Bitcoin or Ethereum, CBDCs are centralized and backed by the government, making them a legal tender. CBDCs aim to digitize traditional forms of currency, allowing for more efficient and secure transactions through digital channels. With 14 African countries working on CBDC, including Nigeria’s active eNaira and the Ghanaian eCedi, in the pilot phase, the answers to these questions are critical. Now that we have defined CBDCs, let’s look at the 15 questions CBDCs must answer.

Design Questions questions CBDCs must answer.

  1. Form of CBDC

One of the first questions that CBDCs must answer is whether the form of the CBDC is essential, and in this regard, there are two schools of thought. Should the CBDC be designed as a token-based currency, similar to cryptocurrencies, or an account-based system resembling traditional banking? The significant difference is whether we concern ourselves more with the units of the currency and their movement or where they are located (who owns them).

2. Essential Features

Anonymity vs. Traceability. Should the CBDC prioritize anonymity for users or ensure traceability of transactions? Balancing privacy and transparency is crucial. It’s an essential issue in a world more concerned about privacy, while institutions must focus on anti-money laundering issues.

Interest-bearing or Interest-free? Should the CBDC accrue interest or remain interest-free, impacting its attractiveness as a store of value? This will also bring in concepts like the time value of money, which affects how people use the currency. The essential features of the CBDC are another one of the questions CBDCs must answer.

3. Distribution Channels:

Direct Distribution vs. Intermediaries: Should the CBDC be distributed directly to individuals, bypassing intermediaries, or through trusted financial intermediaries? This is perhaps one of the most disruptive questions CBDCs must answer. Financial intermediaries are a significant feature of the economic system, and a version of CBDC that wipes them out will likely meet resistance.

Technological questions CBDCs must answer.

  1. Implementation Technology

Blockchain or Alternative Technology? Should CBDCs rely on blockchain technology, known for its transparency and decentralization, or opt for different, potentially more scalable alternatives? While many immediately assume that CBDC will automatically use blockchain technology, this is not set in stone. The scalability trilemma in blockchain technology makes this one of the questions CBDCs must answer.

2. Security Measures

Cybersecurity Protocols: How can the CBDC infrastructure be fortified against cyberattacks and ensure robust security measures to safeguard users’ assets and information? Hacking is increasing, particularly with digital currency, and the network architecture will play a significant role in security. Cybersecurity concerns will add to the questions that CBDCs must answer.

3. Scalability

Handling Transaction Volume: How can the CBDC infrastructure scale efficiently to accommodate the volume of transactions expected in a globalized economy without compromising speed and efficiency?

Regulatory questions CBDCs must answer.

  1. Regulatory Oversight

Central Bank or Other Authorities? Should central banks have sole regulatory control over CBDCs, or should other governmental or supranational bodies be involved in regulation? This question again shines the spotlight on the disruptive capability of CBDCs. While many will jump at the opportunity to eradicate central bank influence on money, this will also take monetary policy away from the table. Monetary policy is used to control the expansion or contraction of economies.

2. Preventing Illicit Activities

Combatting Money Laundering and Terrorism Financing: What mechanisms can prevent CBDCs from being exploited for illegal activities without compromising user privacy? Too much privacy and anonymity will create a haven for illicit flows, while the opposite will infringe on people’s privacy needs.

3. Interoperability

Integration with other Currencies: How can CBDCs ensure interoperability with existing and emerging currencies to facilitate seamless transactions across various platforms? The obvious issue of interoperability with physical currency comes to mind. We also need to consider interoperability with other digital currencies.

Economic questions CBDCs must answer.

  1. Financial System Impact

Systemic Impact: What ripple effects will CBDCs have on the financial system’s overall stability, liquidity, and resilience? We have already touched on matters of financial intermediaries and central banks. How will other sectors of the financial system be affected by the choices around the CBDC? Due to the sheer expansive reach of the financial system, this is one of the critical questions that CBDCs must answer

2. Financial Inclusion

Accessibility and Inclusivity: Will CBDCs enhance or impede financial inclusion by providing easier access to financial services for underserved populations? This is particularly relevant in Africa, where low electrification and internet penetration rates exist. We cannot simply abandon the current system for CBDC but must find a good middle ground between the two that gives us the best of both worlds.

3. Monetary Policy Influence

Impact on Monetary Policy: How will introducing CBDCs affect the efficacy of central banks’ conventional monetary policy tools and strategies? This is especially true in developing economies where monetary policy tools are heavily used and sometimes abused.

Social Ramification questions CBDCs must answer.

  1. Privacy Concerns

User Privacy: What implications will CBDCs have on individuals’ privacy rights, and how can these concerns be addressed without compromising financial transparency? In addition to what we have said on this before, the issue of the programmability of CBDCs comes into play. How much freedom will people have regarding how they can use their CBDC?

2. Access to Financial Services

Enhancing Accessibility: Will CBDCs facilitate greater access to financial services for those traditionally excluded from the formal banking sector? This is an essential question for any new technology. Will it improve access and utility? This may significantly affect how eager people are to adopt it.

3. Trust in the Financial System:

Building Trust: How will introducing and adopting CBDCs influence public trust in financial institutions and the overall stability of the monetary system? These are the final questions CBDCs must answer. This is important in economies where confidence in the financial plan is low. Something many African countries can relate to. Will CBDC be a whole new era or just more of the same?

As central banks and policymakers deliberate on developing and implementing CBDCs, these questions are crucial signposts. The answers will shape the foundational aspects of these digital currencies, influencing their effectiveness, acceptance, and impact on the global financial ecosystem.

Each question underscores the intricate balance between innovation, security, regulation, and societal implications. The quest for optimal solutions requires a collaborative effort between technological innovators, policymakers, economists, and stakeholders to ensure CBDCs evolve as a force for positive change in finance.


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Kudzai G Changunda
Kudzai G Changundahttp://www.about.me/kgchangunda
Finance guy with a considerable interest in the adoption of web 3.0 technologies in the financial landscape. Both technology and regulation focused but, of course, people first.