Central bank digital currencies (CBDCs) have the potential to provide significant benefits to economies and society. They can promote financial inclusion, reduce costs and increase efficiency, and enhance the resilience of the financial system. CBDCs can also help to address some of the challenges posed by private digital currencies, such as ensuring that money is properly regulated and that tax is paid on it. There are many potential use cases for CBDCs, ranging from retail payments to wholesale market settlements. In considering how best to use CBDCs, it is important to take into account the specific needs of different users and the different ways in which CBDCs can be deployed. 

One potential use case for CBDCs is retail payments. At present, many retail payments are made using cash or checks, which can be expensive and slow to process. CBDCs could provide a more efficient alternative, particularly if they were designed to be used in conjunction with existing payment infrastructure such as point-of-sale systems. Another potential use case for CBDCs is wholesale market settlements. Today, most wholesale market transactions are settled using central bank reserves held at central banks or commercial banks. 

One potential use case for CBDCs is as a means of conducting monetary policy. For example, if the central bank wanted to stimulate the economy, it could inject CBDCs into the system through direct transfers to households or businesses. This would have the effect of increasing the money supply and, in turn, boosting economic activity. Another use case for CBDCs is as a store of value. Currently, people tend to hold onto cash to preserve their wealth in times of economic uncertainty. However, if CBDCs were introduced and widely accepted, they could provide more.

Retail CBDC

A retail central bank digital currency (CBDC) is a digital form of fiat money issued by the national or regional central bank. It can be used by the general public for making everyday purchases, just like regular fiat cash. There are many potential benefits of introducing a retail CBDC. For instance, it could help increase financial inclusion and provide a more efficient and convenient way of making payments. Additionally, a retail CBDC could help reduce crime, as it would be much more difficult to counterfeit than physical cash.

There are several different possible use cases for a retail CBDC. For example, it could be used for peer-to-peer payments, online shopping, or even in physical stores. In addition, a retail CBDC could also be used to make payments to government agencies or utility companies. While there are many potential benefits of a retail CBDC, some risks also need to be considered. For instance, a retail CBDC could lead to high inflation rates if not appropriately managed. There is also the risk that a retail CBDC could be used for money laundering or other illegal activities.

Applications of Retail CBDCs

While the use cases for central bank digital currencies (CBDCs) are still being explored, there are a few potential applications for retail CBDCs that could bring significant CBDC benefits for consumers and businesses. One such application is in the area of payments. Retail CBDCs could provide a more efficient way to make online and offline payments. For example, they could be used to make micropayments or settle payments quickly and securely without intermediaries.

Another potential application is in the area of Identity management. With CBDCs, each user would have a unique digital identity that could be used to authenticate themselves when accessing online services. This would help to reduce fraud and increase security online. Finally, retail CBDCs can be used to support smart contracts in a number of ways. For example, they can be used to facilitate the execution of smart contracts by providing a means of payment that is both secure and efficient. In addition, retail CBDCs can also be used to provide a tamper-proof record of the terms of a smart contract, which can help to ensure that the contract is enforced in accordance with its terms. This would enable businesses to automate many processes, resulting in increased efficiency and reduced costs.

Overall, retail CBDCs have the potential to bring about many CBDC benefits for both consumers and businesses. However, it is still early, and further exploration is needed to understand how they can be best used.

Wholesale CBDC

The benefits of a wholesale CBDC are many and varied. Perhaps the most obvious benefit is that it would allow for more efficient settlements between financial institutions. At present, these settlements often involve the use of multiple intermediaries and can be slow and cumbersome. A wholesale CBDC would streamline this process by allowing direct transfers between banks.

Another potential benefit of a wholesale CBDC is that it could help to reduce systemic risk in the financial system. This is because a wholesale CBDC would be centrally issued and controlled by the central bank. It would not be subject to the same risks as other forms of private sector money, such as commercial bank deposits.

In addition, a wholesale CBDC could potentially provide a more stable store of value than other assets, such as fiat currency or commodities. This is because a CBDC would not be subject to the same fluctuations in value as these other assets.

Applications of Wholesale CBDC

One application of wholesale CBDCs is as a settlement asset in central bank money markets. For example, the Bank for International Settlements (BIS) has proposed that central banks consider using a wholesale CBDC to settle transactions in their real-time gross settlement (RTGS) systems. RTGS systems are used by central banks to transfer funds between financial institutions and are an essential part of the financial market infrastructure. A wholesale CBDC could be used to settle transactions in an RTGS system more quickly and efficiently than existing methods.

Another potential application of wholesale CBDCs is to facilitate cross-border payments and settlements. Cross-border payments often involve multiple intermediaries and can take days to settle. This can be costly and inefficient, particularly for small businesses. Wholesale CBDCs have the potential to streamline cross-border payments by reducing the number of intermediaries involved and increasing the speed of settlement.

Wholesale Central Bank Digital Currencies (CBDCs) can be used for asset transfers that have securities involved. For example, when two financial institutions settle a transaction involving securities, they can use a CBDC to transfer the assets and settle the transaction. This would be similar to how transactions are currently settled using central bank money. CBDCs could also be used for other types of asset transfers, such as transferring collateral or payments made in connection with derivatives contracts. In each case, the use of a CBDC would help to ensure that the transaction is settled quickly and efficiently.


Central bank digital currencies (CBDCs) have the potential to revolutionize how we interact with the digital world. While CBDCs are still in their infancy, it is important to explore the various use cases for this new technology. With a better understanding of how CBDCs can be used, we can begin to imagine a future where these currencies are commonplace. This article has provided various use cases associated with wholesale and retail CBDC. For now, CBDCs offer a way for central banks to improve the efficiency of their monetary policy operations and payment systems, and they have the potential to provide a more stable store of value than traditional fiat currencies.

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