Implications for financial market infrastructures of a wholesale central bank digital currency based on distributed ledger technology

An ongoing debate is raging about the possible issuance of a sovereign digital currency by national central banks. This article focuses on one part of this debate, specifically the impact that the issuance of a wholesale central bank digital currency based on distributed ledger technology (DLT)1 could have on financial market infrastructures (FMIs). A sovereign digital currency issued within the network could harness the potential of DLT as an exchange mechanism that, by its very design, mitigates liquidity and credit risks. The article identifies the main areas where this would affect the existing FMIs, classified according to the potential significance of this impact compared with the services these infrastructures currently provide, to allow them to offer enhanced services that would be difficult to achieve with present technology.