Central Bank Digital Currencies, Financial Inclusion, and Privacy: A Normative Perspective

ABSTRACT Central bank digital currencies (CBDCs) are a digital form of a nation's money, issued by its central bank. As opposed to other forms of digital money, such as electronic bank balances or cryptocurrencies, they are centrally managed legal tender. A prominent reason for adopting CBDCs is to foster greater financial inclusion for those who currently lack access to transaction services. Focusing on retail CBDCs, which a central bank issues directly to the public, we argue that CBDCs are not defensible means to the end of greater financial inclusion. CBDCs would lead to reduced financial privacy and would unjustifiably extend the power of unelected central bankers. We argue that banking subsidies and regulatory reform offer the normative upside of greater financial inclusion, without the normative downsides that CBDCs present. This gives prima facie reason for rejecting CBDCs as a policy option.