Summary:
The issuance of Central Bank Digital Currencies (CBDCs) has captured the interest of many commentators, particularly due to the declining use of cash, wide adoption of digital currencies and increased market capitalization of cryptocurrencies. This thesis focuses on the notion of CBDCs and their possible application on the payment system, including a comprehensive overview of Central Bank thinking and the possible effects of introducing a CBDC on the banking sector.
The emerge of disruptive new technologies, such as Blockchain, has the potential to fundamentally alter the structure of the financial system. Blockchain enables secure, transparent and immutable transactions without a central authority, challenging the trust-based model. Over the recent years, the concept of CBDC issuance has been researched by individual Central Banks or consortia, and a blockchain- based system is one of the predominant solutions, although an array of models is under consideration.
A transition towards electronic, Central Bank- issued money challenges the definition of money, the access to legal tender, the role of Central Banks and the financial intermediation model. This thesis elucidates the definition of CBDCs as well as their basic taxonomy, and underlines the legal and technical aspects of this subject, through an extensive bibliographic research. Moreover, a CBDC issuance will have a significant impact on the banking system, as the traditional business model of financial institutions will face radical changes, altering the economic landscape. A pressing need for reshaping the operations and financial structuring model will arise for the traditional financial institutions. The thesis approaches the possible effects of a CBDC issuance on the banking system and the payment system by conducting quality research and extracting empirical results.
Concluding, CBDCs are the evolution of money in this digital era. They have the undeniable capacity to offer valuable financial benefits but at the same time they entail considerable risks.
Keywords:
CBDC, payment systems, Blockchain, financial technology, decentralized transaction systems, banking system
