7 CENTRAL BANKS AND BIS CONTINUE EXAMINATION OF ONGOING POLICY ISSUES FOR RETAIL CBDC

Last updated: June 19, 2025, 23:06 | Written by: Jesse Powell

The future of finance is rapidly evolving, and at the forefront of this transformation is the concept of a Central Bank Digital Currency, or CBDC. Building on an initial report outlining foundational principles for CBDCs published in 2025, the group formed by Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Sveriges Riksbank, Swiss National Bank and BIS has now turned to practical policy and implementation issues. While none of these central banksImagine a digital form of your national currency, issued and backed by your central bank. Today the BIS and the central banks published papers on legal issues and CBDC system design. The central banks involved are the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Board of Governors of the Federal Reserve System, Sveriges Riksbank and the Swiss National Bank.This is the vision that is driving intense research and collaboration among major financial institutions worldwide.In a significant move towards understanding and potentially implementing this revolutionary technology, seven leading central banks, along with the Bank for International Settlements (BIS), are actively engaged in examining the complex policy issues surrounding retail CBDCs.This collaborative effort aims to navigate the uncharted waters of digital currency, exploring both the opportunities and challenges that lie ahead. The Bank for International Settlements has published the fifth paper by the group, highlighting its latest thinking on a potential retail CBDC. The Bank for International Settlements (BIS) and a group of central banks have published a paper detailing their ongoing policy perspectives on a retail central bank digital currency (rCBDC).Their collective insights promise to shape the future of money and payments systems globally, potentially impacting every consumer and business. In a collaborative effort to advance the understanding and implementation of retail Central Bank Digital Currencies (CBDCs), seven central banks and the Bank for International Settlements (BIS) are actively examining ongoing policy issues surrounding this transformative financial technology.This article delves into the ongoing work of these institutions, exploring their latest findings and offering a glimpse into the potential future of digital money.

Understanding the Collaborative Effort on Retail CBDCs

The exploration of retail CBDCs is not a solo endeavor. Seven central banks and the BIS take forward their work on retail central bank digital currencies and analyse policy options and practical implementation issues. New set of reports explores how CBDCs could best meet users' future needs through developing interoperable systems that support private innovation while preserving public trust. Extensive cooperation and dialogue will be required toIt's a complex undertaking requiring the combined expertise of multiple institutions. The Bank for International Settlements has published the fifth paper by the group, highlighting its latest thinking on a potential retail CBDC. The Bank for International Settlements (BIS) and a group of central banks have published a paper detailing their ongoing policy perspectives on a retail central bank digital currency (rCBDC). The new publication is the fifth from the same authorsThe partnership between seven central banks and the BIS represents a concerted effort to thoroughly analyze the potential benefits and risks associated with introducing a digital form of central bank money directly to consumers.

The central banks involved in this pivotal research are:

Bank of Canada
Bank of England
Bank of Japan
European Central Bank
Board of Governors of the Federal Reserve System (Federal Reserve)
Sveriges Riksbank
Swiss National Bank

These institutions, alongside the BIS, are pooling their resources and expertise to address critical policy and practical implementation issues.The goal is to ensure that if a retail CBDC is eventually launched, it will be robust, secure, and beneficial to the wider economy.

Key Areas of Focus in the CBDC Research

The ongoing research covers a wide range of topics, all aimed at providing a comprehensive understanding of retail CBDCs. The Bank for International Settlements (BIS) and a group of central banks have published a paper detailing their ongoing policy perspectives on a retail central bank digital currency (rCBDC).Here are some of the key areas being explored:

Policy Options: Evaluating different models for issuing and managing a retail CBDC, considering factors like accessibility, privacy, and financial stability.
Practical Implementation Issues: Addressing the technical challenges of building and operating a secure and efficient CBDC system, including infrastructure requirements and cybersecurity considerations.
Interoperability: Ensuring that a retail CBDC can seamlessly interact with existing payment systems and private sector innovations.
Legal Frameworks: Analyzing the legal and regulatory changes needed to accommodate a retail CBDC, including issues related to data protection, anti-money laundering (AML), and consumer protection.
Impact on Monetary Policy: Understanding how a retail CBDC might affect the central bank's ability to control inflation and manage the money supply.
Financial Stability: Assessing the potential risks to the financial system, such as bank disintermediation (where consumers move their deposits from commercial banks to the CBDC), and developing strategies to mitigate these risks.

Addressing Legal Issues in CBDC Design

The legal implications of introducing a retail CBDC are vast and complex.The collaborative research is carefully examining these issues to ensure that any potential CBDC framework is legally sound and compliant with existing regulations.This includes analyzing existing laws and identifying any gaps or inconsistencies that need to be addressed.

Some key legal considerations include:

Legal Tender Status: Determining whether the CBDC should be granted legal tender status, meaning it must be accepted as payment for debts.
Data Privacy: Establishing clear rules for the collection, use, and protection of user data, balancing the need for transparency and accountability with the right to privacy.
Consumer Protection: Ensuring that consumers who use the CBDC are protected from fraud, scams, and other risks.
Cross-Border Payments: Addressing the legal challenges of using a CBDC for cross-border transactions, including issues related to currency exchange and regulatory compliance.

Designing Effective CBDC Systems

Beyond the legal considerations, the research also focuses on the technical design of a retail CBDC system.This involves exploring different architectural models, considering factors like scalability, security, and resilience.

Important design considerations include:

Technology Platform: Choosing the appropriate technology platform for the CBDC system, considering options like distributed ledger technology (DLT) or a centralized database.
Security Measures: Implementing robust security measures to protect the CBDC system from cyberattacks and fraud.
Transaction Processing: Designing an efficient and scalable system for processing CBDC transactions, ensuring that it can handle a high volume of transactions without delays.
Accessibility: Ensuring that the CBDC is accessible to all users, including those who are unbanked or underbanked.

The Importance of Interoperability and Private Sector Innovation

One of the key goals of the research is to explore how a retail CBDC can best meet users' future needs.This involves developing interoperable systems that support private sector innovation while preserving public trust.The idea is not to replace existing payment systems, but rather to create a new layer of infrastructure that can complement and enhance them.

Interoperability is crucial because it allows the CBDC to seamlessly interact with existing payment systems, such as credit cards, debit cards, and mobile payment apps.This means that users can easily switch between different payment methods, depending on their preferences and needs.It also fosters competition and innovation in the private sector, as companies can build new products and services on top of the CBDC infrastructure.

For example, imagine a small business owner who uses a CBDC to receive payments from customers.With interoperability, they can easily transfer those funds to their bank account, pay suppliers, or invest in their business.They can also use a mobile payment app to manage their CBDC transactions, making it easier to track their expenses and manage their cash flow.

Balancing Innovation and Public Trust

While innovation is important, it's also crucial to preserve public trust in the financial system.This means that the CBDC system must be secure, reliable, and transparent.Users need to be confident that their funds are safe and that their transactions are processed correctly.This requires a strong regulatory framework and effective oversight from the central bank.

To build public trust, the central banks and the BIS are emphasizing the following principles:

Security: The CBDC system must be highly secure to protect against cyberattacks and fraud.
Resilience: The system must be able to withstand disruptions, such as power outages or natural disasters.
Transparency: The rules and policies governing the CBDC must be clear and accessible to all users.
Privacy: Users' privacy must be protected, while also complying with legal requirements for anti-money laundering and counter-terrorism financing.
Accessibility: The CBDC must be accessible to all users, including those who are unbanked or underbanked.

The Path Forward: Collaboration and Dialogue

The development of a retail CBDC is a complex and challenging undertaking.It requires extensive cooperation and dialogue between central banks, governments, the private sector, and the public.The ongoing research by the seven central banks and the BIS is a crucial step in this process, providing valuable insights into the potential benefits and risks of a retail CBDC.

While none of these central banks have yet committed to issuing a retail CBDC, their research is helping to inform policy decisions and pave the way for future innovation.By working together, they can ensure that any future CBDC is designed in a way that benefits society as a whole.

The publication of these reports represents a significant milestone in the journey towards understanding and potentially implementing retail CBDCs.It provides a valuable resource for policymakers, academics, and anyone interested in the future of money and payments.

Key Takeaways from the Research

The ongoing research into retail CBDCs has yielded several key takeaways that are shaping the future of digital currency discussions.These insights highlight the potential benefits, challenges, and critical considerations for implementing a successful and beneficial CBDC.

Collaboration is Key: The complexity of CBDCs necessitates collaboration among central banks, international organizations, and the private sector.
Policy Options are Diverse: There is no one-size-fits-all approach to CBDC design.Different countries may need to adopt different models based on their specific circumstances.
Interoperability is Essential: A successful CBDC must be able to seamlessly interact with existing payment systems.
Security and Privacy are Paramount: The CBDC system must be secure and protect users' privacy.
Public Trust is Crucial: Building public trust is essential for the successful adoption of a CBDC.

Common Questions About Retail CBDCs

The topic of retail CBDCs often raises many questions.Here are some common inquiries and their answers:

What is a Retail CBDC?

A retail CBDC is a digital form of central bank money that is available to the general public.It's essentially a digital version of physical cash, issued and backed by the central bank.

How is a Retail CBDC Different from Cryptocurrency?

While both are digital currencies, they differ significantly.A retail CBDC is issued and backed by a central bank, making it a liability of the central bank.Cryptocurrencies, on the other hand, are typically decentralized and not backed by any government or financial institution.Their value is often highly volatile.

What are the Potential Benefits of a Retail CBDC?

A retail CBDC could offer several benefits, including:

Improved Payment Efficiency: Faster and cheaper payments, especially for cross-border transactions.
Financial Inclusion: Access to financial services for unbanked and underbanked populations.
Reduced Reliance on Cash: Lower costs associated with printing, distributing, and managing physical cash.
Enhanced Monetary Policy: New tools for central banks to implement monetary policy.

What are the Potential Risks of a Retail CBDC?

There are also potential risks associated with a retail CBDC, including:

Cybersecurity Threats: The risk of cyberattacks targeting the CBDC system.
Privacy Concerns: The potential for government surveillance of financial transactions.
Financial Stability Risks: The risk of bank disintermediation and runs on commercial banks.
Operational Challenges: The complexity of designing and operating a secure and efficient CBDC system.

When Will Retail CBDCs Be Available?

It's difficult to say exactly when retail CBDCs will be widely available.The timeline will depend on the progress of ongoing research, policy decisions, and technological developments.While some countries are further along in the process than others, it's likely to be several years before retail CBDCs become a common part of the financial landscape.

Conclusion: The Future of Money is Digital, But Requires Careful Consideration

The ongoing examination by the seven central banks and the BIS clearly indicates that the future of money is increasingly digital.The exploration of retail central bank digital currencies holds immense potential to revolutionize payment systems, enhance financial inclusion, and modernize monetary policy.However, the journey towards realizing this potential requires careful consideration of the policy implications, practical implementation challenges, and legal frameworks.Extensive cooperation and dialogue among stakeholders are essential to ensure that a retail CBDC, if implemented, is secure, efficient, and beneficial to society as a whole.The collaborative efforts of these institutions are paving the way for a future where digital currencies play a more prominent role in our daily lives, but only with careful planning and execution can we harness the full potential of this transformative technology.The key takeaway is that any foray into the realm of CBDCs must prioritize security, interoperability, and public trust to ensure a successful and beneficial outcome.