Money as a medium of exchange has seen little innovation since the introduction of paper currencies and cashless
transfers in the nineteenth century. However, in the last two years new financial ecosystems driven by
have uncovered new functionalities for money. The role of central bank money continues to increase, having moved
on from the talk of private crypto-assets. Its unique properties remain essential for financial stability and
operation of national and international payment transactions, yet the requirements for what money does are
Tokenization and Central Bank Digital Currency
Tokenization and decentralization are critical to meet new demands for money and establish more direct, transparent
and efficient payment systems. Tokenization has emerged as a format to represent goods, assets and rights. It offers
new financial utility and attributes, promising greater flexibility and liquidity. Central bank issued digital currency
(CBDC) or tokenized central bank money leverages the decentralized and secure advantages of blockchain. This
enables peer-to-peer transactions, offers a more resilient payment infrastructure, reduces transaction costs,
enhances information sharing capabilities and facilitates data reconciliation. Blockchain enabled payment solutions
have been rigorously tested by central banks across North America, Europe and Asia. Download the report to learn
more about these developments.
Digital medium of exchange
Crypto-assets that exhibit currency-like functions—cryptocurrencies—raise important financial stability concerns.
use of blockchain technologies may offer certain advantages relative to conventional currencies yet the lack of
regulatory framework for many of these alternatives remains a significant constraint. The continued emergence of
crypto-assets does indicate new use cases for currencies.
The readiness of blockchain enabled payment solutions has made significant progress during the past several
Blockchain can now address residual concerns about scalability and inter-operability and therefore offers the
foundation for advancing towards select real-life applications and implementation plans.
The greatest benefits of CBDC are to be found in the broader context of reshaping payments relations and rests
integration of assets and currency on a single ledger in the combination of tokenization, decentralization and
information sharing. CBDC attracts payment applications in retail, wholesale and cross-border transactions.
Considerations differ largely dependent on local circumstances and preferences. The adoption of CBDC will depend
set policy objectives.
Central banks can play a major role in shaping the new landscape since they maintain the unique—and essential—
convening power needed to bring together disparate players in the financial sector. This will minimize
in the market and establish a strong foundation.
Success factors include: