A Central Bank Digital Currency (CBDC) is, according to the Bank for International Settlements (BIS), a new form of central bank money the features of which include:

• is a central bank liability;
• denominated in an existing unit of account;
• serves as a medium of exchange; and
• serves as a store of value.
• However, the term “CBDC” doesn’t yet have a fixed meaning.

In November 2020, the Reserve Bank of Australia (RBA) announced that it was partnering with the Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys Software, a blockchain technology company, on a collaborative project to explore the potential use and implications of a wholesale form of a CBDC using distributed ledger technology (DLT). This is part of ongoing research at the RBA on wholesale CBDC. The aim of the project is, according to the Assistant Governor (Financial System) Michele Bullock:

to explore the implications of a CBDC for efficiency, risk management and innovation in wholesale financial market transactions.

In the July update of Law Relating to Banker and Customer, Dr Alan Tyree discusses the motivation for retail CBDCs and what he describes as the “Lower bound” problem. That is, that proponents argue that the ability to pay interest on digital cash holdings has major implications for the conduct of monetary policy.