Vol: 16, Issue: 1 2026

Page: 21-39

The Economics of Central Bank Digital Currency

Mohammed Suhail Mohammed, Hatem Mohammed Hammoud

Received Date: 2025-11-19

Accepted Date: 2025-12-22

Published Date: 2026-01-18

10.37648/ijtbm.v16i01.003

The paper provides a systematic review of central bank digital currency (CBDC) literature that grows at a pace. It defines the economic factors implying the appearance of digital money and analyzes the primary reasons why it is necessary to implement a CBDC. The paper goes further to discuss the possible effects on the financial system and point out some of the policy issues and challenges. Although most of the academic literature captures the concerns of the policymakers about the risks of bank disintermediation and financial instability, it also highlights the circumstances in which these adverse effects can be countered. Lastly, the paper highlights that there are also a few research gaps that need to be addressed, such as the data privacy issues and the influence of the end-user preference in the demand of digital payment instruments.

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