Central Bank Digital Currency (CBDC) is defined by Ward and Rochemont (2019) as a digital form of central bank money different from balances in traditional reserves or settlement accounts. Kumhof and Noone (2018) define CBDC as electronic central bank money that can be accessed more broadly than reserves, potentially has much greater functionality for retail transactions than cash, has a separate operational structure to other forms of central bank money, allowing it to potentially serve a different core purpose, and can be interest bearing, under realistic assumptions paying a rate that would be different to the rate on reserves. In simple terms, CBDC is a digital form of money that currently exists in the current central banking system used for banking transactions and CBDC is part of a bank reserves in the form of digital.

Question 2 If you were the governor of a state bank in Country A, would you agree if the CBDC is to be introduced in Country A? Give explanations of your decision.