Central Bank Digital Currencies: Tools for an Inclusive Future?

Central Bank Digital Currencies (CBDCs) have rapidly evolved from a sci-fi concept to a plausible alternative to cash that is being studied by central banks all over the world. According to a Belfer Center tracker, over 50 central banks have pursued or are engaging in CBDC work as of August 2020. However, while 10 central banks have already piloted or announced plans to pilot a CBDC in the near term, most are in the early stages of research and experimentation.

In this brief, we outline the common motivations driving central bank work on CBDCs. We then explore CBDCs’ potential impacts on financial inclusion, a primary motivation in developing and emerging markets that has also gained significant traction in developed economies during the COVID-19 related global recession. We conclude that for CBDCs to achieve its financial inclusion goals, more technical advancement in offline adaptability and policy deliberations around issues of identity and traceability are needed.

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