Blockchain Application for Central Bank Digital Currencies (CBDC)

Central Bank Digital Currency (CBDC) is a digital version of domestic currency with the unit of account equivalent to its domestic currency. Blockchain can be used to implement CBDC to execute and settle peer-to-peer transactions. With the emergence of private money such as cryptocurrencies and stable coins and the growing use of digital payments to lessen the global pandemic spread, CBDC is an active research area among the central banks worldwide. Many central banks started their CBDC projects by building proofs of concept (PoCs) to replicate wholesale payment systems and expand their investigation into other use cases such as delivery versus Payment (DvP) and cross-border remittance. PBoC, China Central Bank, has already started a pilot testing of their digital currency. This paper discusses the application of blockchain for CBDC by presenting CBDC projects by central banks. Moreover, this paper analyses issues, identify challenges, and discusses future works in this rapidly evolving field.