Feasibility of adopting a Central Bank Digital Currency (CBDC) as a country's primary currency

Abstract

 The emergence of Central Bank Digital Currencies (CBDCs) has provoked significant interest among policymakers, economists, and financial institutions worldwide. As digital transformation reshapes the global economy, CBDCs offer a potential pathway for central banks to modernize monetary systems, enhance financial inclusion, and improve payment efficiency. This article explores the feasibility of CBDCs becoming the primary form of money in a country, examining their potential benefits, challenges, and implications for financial stability, monetary policy, and economic sovereignty. Drawing on empirical research, including stability metrics such as Z-scores, the findings suggest that CBDCs can coexist with existing financial systems without causing significant disruption. However, their successful implementation requires robust technological infrastructure, adaptive regulatory frameworks, and widespread public trust. The discussion highlights opportunities for CBDCs to enhance financial inclusion, streamline cross-border payments, and provide central banks with innovative policy tools. At the same time, challenges such as cybersecurity risks, potential disintermediation of commercial banks, and privacy concerns must be carefully addressed. Policymakers must adopt tailored strategies to balance innovation with stability, ensuring that CBDCs serve as a secure, efficient, and inclusive monetary tool. This article concludes with recommendations for phased implementation, public-private collaboration, and global coordination to maximize the benefits of CBDCs while minimizing risks. By addressing these critical factors, CBDCs have the potential to revolutionize the financial landscape, offering a modern alternative to traditional cash and commercial bank deposits while supporting long-term economic resilience and growth.