Central bank digital currencies and their implications for monetary policy and financial stability

The master thesis aims to explore the central bank digital currencies (CBDCs) as either complementary or alternative payment instrument to physical cash.The research seeks to discern CBDCs' key characteristics, advantages and disadvantages, issuance options and their potential repercussions on monetary policy and financial stability.Our investigation draws on a comprehensive literature review, evaluation of research papers and reports from international financial organizations and central banks.We focused on analyzing the ongoing development of CBDCs issuance, particularly in relation to the investigation digital euro.It becomes evident that addressing implementation concerns is becoming increasingly necessary, since over 130 major world economies acknowledge the opportunity.As of now, 11 nations have introduced their CBDCs, 21 countries have them in pilot state, over 30 in various developing phases, 46 actively addresses this trend, and 16 countries have not yet engaged in it.The anticipated effects encompass modernizing payment systems, reinforcing central banks' control improving policy transmission, enhancing financial stability through rapid fund reallocation during potential downturns, facilitating credit creation, influencing exchange rates and reducing inefficiencies in cross-border transactions.