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Central bank digital currencies and fast payment systems: rivals or partners?

Author

Listed:
  • Jose Aurazo
  • Holti Banka
  • Jon Frost
  • Anneke Kosse
  • Thomas Piveteau

Abstract

Retail central bank digital currencies (CBDCs) and fast payment systems (FPS) share a number of similarities. Both allow for instant transactions for end users, can rely on underlying infrastructures operated by the central bank and can allow for an important role for private payment service providers (PSPs) to offer their services to end users. The key difference is that retail CBDCs are a new form of central bank money for the general public, while FPS to date allow end users to transfer private money (eg commercial bank money or electronic money). The paper analyses how retail CBDCs and FPS compare with each other and why some jurisdictions have opted for a retail CBDC, while others have chosen to introduce an FPS or both. Interviews with central banks in 14 jurisdictions around the world (at different stages of implementation of a retail CBDC and/or an FPS) show that some see a case for both to fulfil different policy goals and complement one another. The paper also compares emerging challenges and risks related to retail CBDCs and FPS. Our key conclusion is that the choice between a retail CBDC or an FPS, or both, is very contextual and will depend on the market features, ecosystem and degree of maturity and innovation of existing payment infrastructures in a country. Decisions regarding a retail CBDC, FPS or both involve important considerations regarding success factors, design choices and the role of central banks and the private sector.

Suggested Citation

  • Jose Aurazo & Holti Banka & Jon Frost & Anneke Kosse & Thomas Piveteau, 2024. "Central bank digital currencies and fast payment systems: rivals or partners?," BIS Papers, Bank for International Settlements, number 151.
    • Handle: RePEc:bis:bisbps:151
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    References listed on IDEAS

    as
    1. Mr. Tanai Khiaonarong & David Humphrey, 2022. "Instant Payments: Regulatory Innovation and Payment Substitution Across Countries," IMF Working Papers 2022/228, International Monetary Fund.
    2. Jon Frost & Priscilla Koo Wilkens & Anneke Kosse & Vatsala Shreeti & Carolina Velásquez, 2024. "Fast payments: design and adoption," BIS Quarterly Review, Bank for International Settlements, March.
    3. Jookyung Ree, 2023. "Nigeria’s eNaira, One Year After," IMF Working Papers 2023/104, International Monetary Fund.
    4. Anneke Kosse & Ilaria Mattei, 2023. "Making headway - Results of the 2022 BIS survey on central bank digital currencies and crypto," BIS Papers, Bank for International Settlements, number 136.
    5. Committee on Payments and Market Infrastructures & World Bank Group, 2016. "Payment Aspects of Financial Inclusion," World Bank Publications - Books, The World Bank Group, number 24806.
    6. Giulio Cornelli & Leonardo Gambacorta & Livia Pancotto, 2023. "Buy now, pay later: a cross-country analysis," BIS Quarterly Review, Bank for International Settlements, December.
    7. Raphael Auer & Giulio Cornelli & Jon Frost, 2023. "Rise of the Central Bank Digital Currencies," International Journal of Central Banking, International Journal of Central Banking, vol. 19(4), pages 185-214, October.
    8. Boakye-Adjei, Nana Yaa & Auer, Raphael & Banka, Holti & Faragallah, Ahmed & Frost, Jon & Natarajan, Harish & Prenio, Jermy, 2023. "Can central bank digital currencies help advance financial inclusion?," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 17(4), pages 433-447, December.
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