Abstract

Central bank digital currency challenges: The case of Greece

Veni Arakelian

Central bank digital currencies (CBDCs) can be defined as a form of digital money, denominated in the national unit of account, which is a direct liability of the central bank. These can be either for wholesale use (i.e., by financial institutions) or retail use (i.e., by households and businesses – the general public). CBDCs can be either account-based, meaning that they rely on some form of identification, or token based (either distributed ledger technology or conventional technological infrastructures), meaning that they allow for anonymity in payments. In most cases, CBDCs are being designed such that they preserve the two-tier structure of the monetary system, with a division of labor between the public and private sectors.

The introduction of CBDC is associated with motivations, practical challenges, and risks; payment motivations, monetary policy motivations, and balancing motivations, all of which are associated with their own risks, in addition to the financial stability risks. The motivations are many and varied, and the introduction of CBCDs in countries with different characteristics, e.g., emerging or developed economies, raises the question of whether it will be as easy and have the same impacts as individual jurisdictions can also differ significantly18. Currently, the focus is on providing CBDC for payments, enabling widespread access to the central bank’s money, and providing resilience. For example, in the event that the networks cannot function, cash acts as the only backup method. CBDC  could be an additional option, improving operational resilience. To increase financial inclusion, a CBDC must address the varied and frequently complex causes of exclusion, which vary by jurisdiction. Given the complexity of this issue and the potential underlying barriers to digital inclusion (such as illiteracy), any CBDC initiative will likely need to be incorporated into a larger set of reforms. However, increasing digitization may leave certain segments of society behind due to potential barriers involving trust, digital literacy, IT access, and data privacy.

The increased rate of change in the cross-border payments market is a result of rapidly changing consumer demands, increasing smartphone penetration and the popularity of digital access. The driving force is the availability of alternative solution providers that offer faster, less expensive, and more transparent cross-border payment solutions in response to clients’ unwillingness to pay for banking services.

In this paper, we discuss the CBDCs from the Greek perspective. In particular, we address the financial inclusion prospects, and discuss the processes available via Greek commercial banks to execute crossborder payments, and the potential changes after the launch of the CBDCs.