Since the Facebook Libra project was announced, there has been an ongoing debate amongst central bankers on whether they should launch digital currencies. Central banks from some of the world’s biggest economies have expressed concerns about the project. They fear that Facebook, which has over 2 billion users globally, could upend their monetary policies. The debate now appears to be moving towards what type of digital currency these banks will launch. Recently, the deputy governor of France’s Central Bank proposed that central banks should launch wholesale digital currencies.

Retail versus Wholesale CBDC

Retail CBDC is one that is targeted at the masses. These digital currencies would typically be powered by DLT technology. The coins would have features of traceability, anonymity, and availability. Besides that, they could make it feasible for central banks to apply interest rates. Such coins are quite popular with central bankers in emerging economies. They could help to promote financial inclusion and accelerate the shift to a cashless economy. Additionally, they could reduce the cost of shipping and printing cash. A good example of this is the central bank of Bahamas, which unveiled plans to launch its digital currency dubbed the Sand Dollar.

A wholesale CBDC is more focused on financial institutions. It would be targeted at financial firms that hold reserve deposits in a central bank. This type of digital currency could help to improve the efficiency and security of financial settlements while also reducing liquidity and counter-party credit risks.

Such a CBDC could replace a central bank’s reserves or help to complement them. The coin would essentially be a bearer asset; enabling the sender to transfer value without the need for middlemen. This would be different from the current system where central banks credit and debit accounts without the actual transfer of value.

This is the most popular amongst central bankers, especially in developed nations. It would help to increase the efficiency of the current financial system while also making it safer and less expensive. This view is shared by the Bank of International Settlements, which is sometimes called the central bank of central banks. Various projects have already been tried out by various central banks. Some of the most famous are Project Jasper in Canada, and Project Inthanon in Thailand.

Why Wholesale CBDC is More Palatable

Most central banks would prefer a wholesale CBDC to avoid competition with private money issuers that would arise with retail CBDC. Such digital currencies, issued by private entities, could have dire consequences on the ability of central banks to control monetary policy.

With a wholesale CBDC, it would also be possible to link various major financial platforms. For instance, FX and securities platforms could be directly linked with such a digital currency to improve the speed of trades and reduce the settlement risk. Additionally, wholesale CBDC could improve the cross-border payments infrastructure while cutting costs by reducing the number of intermediaries involved.


It is most likely that most central banks will go towards the CBDC route. This is a less disruptive approach and it will help to make global payments faster, cheaper, and more secure.

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