The University of Cambridge has released a new report, Wholesale Central Bank Digital Currencies: Approaches, Implementation Strategies and Use Cases, authored by Keith Bear, Hatim Hussain, Polina Vertext, Hugo Coelho, and Bryan Zhang. Drawing from extensive research, consultations with industry stakeholders, and interviews with regulators, the report delves into the key motivations, models, and policy considerations shaping the development of wholesale Central Bank Digital Currencies (wCBDCs).
The study highlights the growing need for wCBDCs as a risk-free settlement asset to underpin digital transaction infrastructure. By addressing the potential instability associated with tokenised private assets, wCBDCs are emerging as a viable alternative to upgrading traditional Real-Time Gross Settlement (RTGS) systems. Central banks are exploring these digital assets to align with programmable, real-time infrastructures that enable seamless cross-currency liquidity and support tokenised asset transactions.
Key insights from the report include:
- Settlement Asset Landscape: A comparative analysis of settlement options ranging from wCBDCs to stablecoins, examining their features, associated risks, and potential roles in financial ecosystems.
- Implementation Models: An evaluation of various models for wCBDC issuance, alongside their potential advantages and drawbacks.
- Global Case Studies: Insights from proof-of-concept projects and trials, including the European Central Bank’s experiments with distributed ledger technology (DLT), the Bank of England’s Project Meridian, and cross-border initiatives spearheaded by the Bank for International Settlements (BIS).
- Infrastructure Evolution: Exploration of emerging infrastructure options designed to support the tokenisation of financial and central bank assets, with an emphasis on achieving interoperability across platforms.
- Policy and Regulatory Considerations: A discussion of the legal and regulatory implications for wCBDCs, emphasising the importance of central banks focusing on the “how” of implementation while safeguarding financial system resilience and stability.
The report also addresses the increasing tokenisation of financial markets and the evolving central bank stance on the provision of risk-free settlement assets. It argues for a forward-looking approach that balances innovation with robust safeguards to future-proof financial systems.
By situating wCBDCs within the broader context of digital finance transformation, this report from the University of Cambridge offers a roadmap for central banks and policymakers grappling with the complex challenges and opportunities posed by digital currencies.
