Retail Central Bank Digital Currency Design Choices: Guide for Policymakers

Central bank digital currencies (CBDCs), particularly retail CBDCs intended for daily public transactions, have garnered attention globally. Benefits of CBDC implementation heavily depend on its design, which, if not executed well, can lead to technological and privacy issues. Through case study examination, decision tree analysis, and IT system architecture modelling, this paper identifies key architectural and technological facets of retail CBDCs. We propose a decision-making methodology allowing policymakers to tailor CBDC design to their unique circumstances and requirements. In achieving this, we first outline core and optional CBDC properties and examine design choices from existing projects, form a list of assumptions affecting CBDC architecture and design, as well as vital design choices and trade-offs. Our research includes the development of 36 distinct IT architectures for CBDCs, demonstrating how different assumptions linked to policy objectives can influence the CBDC system design. These findings offer practical guidelines for policymakers, emphasizing the necessity to clearly define and prioritize policy objectives to form correct assumptions before applying our methodology. This approach helps to ensure that the CBDC design is optimally aligned with national economic goals and technological capabilities.