This book examines the implications of introducing a central bank digital currency (CBDC) within an economy, focusing on its interplay with the existing monetary system, banking structures, and macroeconomic environments. CBDC, representing a new form of central bank money, is motivated by technological and demand driven factors and marks a structural change in the monetary system with the aim of not disrupting its functional balance. The results suggest that CBDC demand is cyclical, increasing during high inflation scenarios due to behavioral changes and decreasing cash utility, with significant implications for central bank operations and monetary policy implementation. Survey-based data support the assumptions and results of the model, demonstrating that CBDC demand is heterogenous, varies with economic conditions, and is interest rate sensitive. Microlevel analyses underscore the heterogeneity among banks and countries in the euro area, revealing varying levels of preparedness and resilience to potential liquidity and refinancing shocks. Scenarios exploring different holding limits highlight that a low initial limit supports harmonized implementation and minimizes systemic risks, while market-driven flexibility for higher limits could be feasible under central bank supervision. The findings emphasize the importance of risk-reducing measures, particularly with respect to holding limits, to balance financial stability and effective monetary policy implementation.

Hendrik Becker works in the public sector, focusing on monetary policy implementation, financial market infrastructures and digital money. He completed his PhD in economics at FernUniversität in Hagen, where his research examines central bank digital currencies and their implications for the monetary and banking system.