Central Bank Digital Currency (CBDC)

The IMF’s Central Bank Digital Currency (CBDC) Virtual Handbook is a reference guide for policymakers and experts at central banks and ministries of finance seeking to evaluate CBDCs. The project is made possible by the Government of Japan.

The CBDC Virtual Handbook aims to collect and share knowledge, lessons, empirical findings, and frameworks to address policymakers’ most frequently asked questions on CBDCs. As knowledge and analysis grows, new chapters will be added and old chapters will be updated.

Current chapters are available below. These cover financial stability, comparison with other payment innovations, and end-user adoption among other topics.

Last Updated: March 2025

Chapters At-a-Glance

How Should Countries Explore CBDCs?

How Can Central Banks Manage CBDC Product Development?

Will CBDCs Affect Monetary Policy Transmission?

How Can Capital Flow Management Measures Be Implemented with CBDCs?

Could a CBDC Help Promote Financial Inclusion?

NEW Positioning CBDC in the Payments Landscape

NEW Cyber Resiliency of the CBDC Ecosystem

NEW CBDC Adoption: Inclusive Strategies for Intermediaries and Users

NEW CBDC Data use and Privacy Protection

NEW Implications of Central Bank Digital Currencies for Monetary Operations

NEW Cross-Border Payments with Retail Central Bank Digital Currencies: Design and Policy Considerations

1. How Should Countries Explore CBDCs?

Exploring CBDCs is a significant undertaking that involves complex decisions in a rapidly changing digital environment. This chapter presents a dynamic framework that is iterative, flexible, and responsive to new information as it arises. First, countries must clearly establish the policy objectives of CBDCs and relevant success measures. Second, risks must be identified, quantified as much as possible, and accompanied by a strategy to contain them. Third, domestic authorities should undertake a careful assessment of their capacity to experiment with, regulate, oversee, and eventually implement CBDCs. Fourth, communication about CBDCs is crucial and a strategy to guide engagement with stakeholders should be developed early on. Fifth, central banks should establish a set of feature requirements based on the earlier steps. Sixth, a sound legal basis and robust regulatory foundations should underpin the CBDC project from the start. These steps should not give the impression of a linear process. Given rapid developments in technology and the ongoing lessons that are—and will be—learned world-wide, CBDC exploration will need to continue even beyond the point of issuance.

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2. How Can Central Banks Manage CBDC Product Development?

This chapter introduces the '5P methodology' designed to guide central banks in exploring and developing CBDC, from research to potential launch. The methodology draws from experiences in various jurisdictions and incorporates best practices from different industries, and is intended to facilitate experimentation and support progressive decision-making while effectively managing risks. The 5P methodology comprises five distinct phases. The preparation phase focuses on researching trends, defining objectives, establishing success criteria, evaluating feasibility, assessing capacity, and analyzing risks. The proof-of-concept phase involves conducting small-scale empirical tests and validation activities to gain insights into CBDC designs, typically in a laboratory environment. The prototype phase concentrates on the development or acquisition of necessary technologies and the selection of relevant partners. The pilot phase represents the live testing of a quasi-final product, while the production phase marks the final issuance and operation of the CBDC.

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3. Will CBDCs Affect Monetary Policy Transmission?

CBDCs could affect the macroeconomic environment that underpins monetary policy transmission. A CBDC offers a safe store of value and efficient means of payment, which can increase competition for deposit funding, raise banks’ share of wholesale funding, and lower bank profits. A CBDC also could bolster financial inclusion and help reduce dollarization or cryptoization. These changes in the macroeconomic environment can potentially strengthen the channels of monetary policy transmission if CBDC is appropriately designed. For moderate levels of CBDC holdings, the effects on monetary policy transmission are expected to be relatively small in normal times. However, these effects can be more significant in an environment of low interest rates or financial market stress in which the relative value of a CBDC increases. A non-remunerated CBDC could harden the zero lower bound for interest rates. Finally, a CBDC could increase risks of flight to safety from retail bank deposits in periods of market stress.

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4. How Can Capital Flow Management Measures Be Implemented with CBDCs?

This chapter explores the benefits, risks, and complexities of implementing capital flow management measures (CFMs) through CBDCs. It argues that CFMs, when warranted, can continue to be part of a country’s policy toolkit in the digital age. Moreover, the digitalization of information and programmability of transactions—leading to the automation of compliance checks—could bring efficiency gains compared to today’s implementation of CFMs, though raise operational risks. Importantly, the implementation of CFMs would leverage the programmability of CBDC transactions, not of CBDC itself, as money must remain fungible. Several questions need to be further analyzed, for instance the specification of the legal framework surrounding digital CFMs.

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5. Could a CBDC Help Promote Financial Inclusion?

Financial inclusion is often a key policy objective for a retail CBDC, especially in emerging and lower-income countries. If properly designed to address barriers to financial inclusion, CBDCs could gain acceptance as a payment mechanism for financially excluded populations. CBDCs can be designed to replicate some of the desirable properties of cash, for instance, access to payments without a bank account, trust associated with central bank money, low or no fees, and less stringent identity requirements for low-risk populations who struggle to obtain formal identity documentation. However, full compliance with financial integrity requirements remains necessary. A CBDC could also offer benefits beyond those of cash, such as the development of financial history to help widen access to credit. A CBDC can thus serve as a valuable entry point to the formal financial system. As a public-sector led initiative without profit incentive, CBDCs could also stimulate competition by lowering the prices of payments and financial services. Moreover, CBDCs can address the needs of remote and low-income populations not well served by the private sector, through availability on a variety of hardware devices and in offline environments. However, a CBDC by itself is not a silver bullet to financial inclusion, as it can face barriers common for digital products such as gaps in digital and financial literacy, and access to electricity and digital networks. A CBDC may not be the best financial inclusion solution for every country, and policymakers should assess a wide range of policies and initiatives, including but not limited to CBDCs, to support financial inclusion.

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NEW 6. Positioning CBDC in the Payments Landscape

Do central banks need a CBDC when already equipped with other well-established digital payments systems? Should central banks establish one system before the other? This chapter compares retail CBDC with fast payment systems and e-money, and explores how to prioritize development work if resources are constrained. If well designed, regulated, and complemented by an active developer community, all three systems could meet central bank objectives such as payments efficiency and financial inclusion. However, central banks may be constrained in satisfying some of these goals. And CBDC comes with its own unique benefits, such as its property as public money. In an increasingly digitalized economy, that feature may be important to underpin the fungibility of money and trust in the financial system. It is possible to envisage the coexistence of fast payment systems, e-money, and CBDC in many payment landscapes across the world.

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NEW 7. Cyber Resiliency of the CBDC Ecosystem

If CBDC were susceptible to cyber risks, it could undermine consumer confidence and trust in the financial system. The intricately interconnected CBDC ecosystem—comprising central banks, commercial banks, payment service providers, and technology vendors—faces an array of cybersecurity challenges, exacerbated by human vulnerabilities and the use of novel technologies untested at scale. The chapter proposes an evaluation of technology and design choices to ensure the safety of CBDC. Although specific international guidance on securing a CBDC ecosystem does not exist, the chapter draws on insights from established frameworks. It proposes four overarching principles rooted in foundational requirements and best practices. It also emphasizes the importance of user training and stakeholder collaboration to mitigate cyber risks.

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NEW 8. CBDC Adoption: Inclusive Strategies for Intermediaries and Users

Among the jurisdictions that have launched CBDCs or are conducting large-scale pilots, adoption remains slow and limited. But that is not necessarily a sign that CBDC holds little value. It just means that central banks cannot take it for granted that CBDC, once launched, will be adopted and scaled up easily. CBDC adoption faces many hurdles, including the classic chicken-and-egg problem wherein adoption by consumers is dependent on the participation of merchants, and vice versa. This chapter encourages policymakers to think about adoption early in their CBDC journey, by emphasizing that successful CBDC implementation hinges not only on technical readiness and operational robustness, but also on strategic policy and design choices that encourage the involvement of end-users and intermediaries from the outset. To support this endeavor, this chapter introduces a novel framework comprising a comprehensive array of regulatory strategies, education and communication initiatives, design and deployment choices, and incentive mechanisms to help policymakers prepare for, and manage, CBDC adoption.

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NEW 9. CBDC Data use and Privacy Protection

Can CBDC data be leveraged to create value to end-users while protecting their privacy? This chapter considers the economic value of CBDC data, outlines the risks that CBDC data use could pose to privacy, and explores how central banks can strike a balance between CBDC data use and privacy protection. CBDC allows for a “digital trail” of data to be accessed, collected, processed, and stored. This data may have economic value and could help central banks achieve policy objectives. At the same time, using that data could contravene privacy and undermine trust in CBDC. This trade-off differs by country depending on norms, legal and regulatory frameworks, and preferences. CBDC offers an opportunity to improve this trade-off in comparison to private digital payment systems, including through robust institutional arrangements and technological solutions.

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NEW 10. Implications of Central Bank Digital Currencies for Monetary Operations

CBDC is central bank money. So would issuing CBDC to meet user demand interfere with monetary policy operations? Could central banks have difficulty in maintaining a steady monetary policy stance? At first glance, yes. CBDC could crowd out other forms of money and change reserve balances in the banking system, which, in turn, may influence short-term interest rates. Moreover, volatility in CBDC demand could affect central banks’ ability to forecast liquidity, drawing market rates away from the policy target. However, central banks can mitigate these effects by adapting their monetary operations, such as engaging in fine-tuning operations and providing more liquidity to the banking sector. Central banks can also alter CBDC design, such as implementing access criteria and setting holding or transaction limits.

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NEW 11. Cross-Border Payments with Retail Central Bank Digital Currencies: Design and Policy Considerations

Many central banks are exploring retail CBDC issuance, hoping to also improve cross-border payments. CBDC is a safe, liquid asset that can decrease the reliance on financial intermediaries and reduce settlement risks. Additionally, CBDC is a clean slate on which cross-border payment processes can be redesigned and optimized. This chapter distills insights from ongoing research and experimentation, outlining design and policy considerations affecting all steps of a cross-border payment: access, communication, currency conversion, compliance, and settlement. It is vital to consider cross-border implications early in the development process to prevent unintended barriers, even if the CBDC is only intended for domestic use initially. As central banks navigate these complex issues, adopting international standards, evaluating access policies, and fostering international cooperation will be essential for achieving efficient and inclusive cross-border payment solutions.

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