Private sector cryptocurrencies—digital assets used as a medium of exchange—have received a lot of public attention in recent years. Now, central banks across the world are exploring the introduction of central bank digital currencies (CBDCs) to address long‑standing issues with the fiat money system and to boost financial inclusion.
CBDCs will likely lead to structural changes in the way that individuals and businesses access the banking system, potentially improving financial resilience and reducing business cycle volatility. These changes will have investment implications, particularly in emerging markets where we believe CBDCs will bring the biggest benefits. The differing pace of CBDC implementation, and the potential benefits for each economy, will also create relative value opportunities.
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