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Some Thoughts on Central Bank Digital Currency

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Author: David Andolfatto

The literature examining the question of central bank digital currency (CBDC) has grown immensely in a very short time. Much progress has been made since I first learned of the idea in a blogpost authored by J. P. Koning in 2014. That modest article soon led me to openly speculate on the merits of a central bank cryptocurrency in a talk I delivered at the International Workshop on P2P Financial Systems in Frankfurt (Andolfatto 2015). My audience, which consisted mainly of entrepreneurs, seemed to receive my talk with a polite mixture of bemusement and anxiety. Surely, I couldn’t be serious? To be honest, I’m not sure that I was. But then the threat of Facebook’s Libra came along, and central bankers around the world suddenly began to take the idea very seriously indeed.

In this article, I will share some of my thoughts on CBDC — what it is, the rationale behind the endeavor, and how it might be implemented in broad terms. I’ll also address some of the concerns expressed by skeptics — in particular, the possible impact on banks and the implications for financial stability. I discuss these issues primarily in the context of the United States.

Andolfatto, David, “Some Thoughts on Central Bank Digital Currency”, Cato Journal, Vol. 41 No. 2. Available at: