The Rise of Central Bank Digital Currencies

Authors: János Müller, Ádám Kerényi

In: Financial and Economic Review, 21(3), 122–148.

Abstract

The revolutionary rise of digital financial innovations has heralded a new era in the operation of the banking system and central banks, which has brought about the digital transformation of money. Central banks must respond to challenges profoundly affecting and transforming the financial system. Central banks have been exploring the introduction of central bank digital currency (CBDC), in order to promote stability and sustainable development, to preserve competitiveness and to bolster the effectiveness of their monetary policies. In addition to smooth operation, the preservation of sovereignty and the effectiveness of the monetary policy also need to be ensured. Along with its expected advantages, the paper also discusses the risks relating to CBDC. CBDC appears in the international financial system, generating competition among global currencies. The rivalry between the dollar, the euro and the yuan may alter positions in the global financial system. A rearrangement of international power relations is at stake. Against this background, the paper also provides insight into Hungarian news on preparations for the introduction of CBDC.