The rise of private stablecoins, overwhelmingly denominated in US dollars, can weaken domestic monetary policy transmission in the euro area. Whether a CBDC is the right policy response, or whether direct regulation of stablecoins would be more effective, remains an open and urgent question.

Whether through wholesale-only pilots, retail expansions, or cross-border payment networks, central banks are racing to shape the next generation of money, and the choices they make now will determine which nations lead and which fall behind in the global digital economy.

This newsletter explores how private digital money issuers may fragment monetary systems when units of account diverge, and examines competition between bank deposits, platform tokens, and CBDCs, showing that fast payment systems and central bank digital currencies can enhance financial inclusion and welfare.

The ECB has made significant progress in the preparation phase of the digital euro project, focusing on developing a scheme rulebook, conducting user research, and engaging with stakeholders. Recent research estimates potential losses for banks in terms of payment fees and increased refinancing costs.

A literature review that highlights the most recent findings on the impact of CBDCs on traditional banking in terms of payments, lending, and liquidity and maturity transformation. A 2024 tracker of CBDC projects around the world.

Most research analyzes the impact of CBDCs on banks under the assumption that they are perfect substitutes to bank deposits. When this assumption is relaxed, how will CBDCs impact the banking sector?

In June the European Commission will publish a legislative proposal on principles for the digital euro as the ECB is considering to advance to an experimental phase. Some interesting commentary on the usefulness and design of the digital euro.

There is a rush to issue CBDCs driven not only by payment system markets considerations but also by an intention to gain financial and geopolitical primacy. Recent research examines these issues.

How will CBDCs affect international currency competition? A potential new design for CBDCs from MIT.

A recent Federal Reserve Board research paper outlines the Fed’s intentions for issuing a digital dollar and the possible approaches.