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The Rise of Central Bank Digital Currency: Implications for Commercial Banks

Himadri Sikhar Pramanik

Lead, Research, TCS

Chandershekher Joshi

Innovation Evangelist, Digital, TCS

CBDC – a key enabler of value-added services for consumers and businesses 

Central Bank Digital Currency (CBDC) is the digital form of a country’s currency. Increasing interest in digital currencies and technological advances have resulted in central banks experimenting with CBDC in partnership with commercial banks. Several CBDC pilot projects have been initiated across the globe and are delivering benefits. Typically, three CBDC models are being implemented – wholesale CBDC, retail CBDC, and cross-currency CBDC. Wholesale CBDC is the most common and involves the central bank and commercial banks. Retail CBDC is being implemented in a two-tier model while cross-currency CBDC projects aim to make inter-bank cross-border transactions faster and seamless.

However, CBDC implementation impacts financial systems in several ways. To prepare for the evolution of the digital currency, commercial banks must:

  • Participate in CBDC policy formulation

  • Realign technology adoption with CBDC platforms

  • Design new offerings and reshape the customer experience