Theoretical Foundations of the Institutional Design of Central Bank Digital Currency

Abstract

The study aims to provide a theoretical justification of the institutional design of central bank digital currency (CBDC) in the context of the transformation of the modern monetary system driven by technological innovations, the evolution of the social nature of money, and the growing role of private digital assets. Special attention is devoted to analysing the institutional constraints of traditional models of monetary circulation and identifying the conceptual parameters that shape the architecture of CBDC functioning. The methodological framework is based on institutional analysis, content analysis of academic sources, a comparative approach to assessing models of monetary circulation, and a system analysis of technological architectures of CBDC. Elements of the historical genetic method are applied to trace the evolution of monetary concepts from classical theories to contemporary digital forms, while the structural functional approach is used to determine the roles of key institutions within the mixed model of monetary circulation. The results demonstrate that the digitalisation of the financial system reinforces the need to reconsider the institutional nature of money and the mechanisms of their issuance, circulation, and control. The study identifies key institutional constraints of the traditional monetary architecture, including dependence on banking intermediation, vulnerability to financial shocks, insufficient transparency of monetary flows, and limited financial inclusion. It is shown that the introduction of CBDC can modify the structure of monetary aggregates, enhance the effectiveness of monetary transmission, and ensure a new level of integration between public and private payment infrastructures. A classification of CBDC institutional design models is developed according to the degree of intermediation, functional scope, and technological architecture, enabling the systematisation of potential scenarios for the development of the digital monetary system. The conclusions confirm that the institutional design of CBDC is a multidimensional concept that integrates legal, organisational, technological, and economic parameters, defining a new architecture of monetary circulation. An optimal CBDC model should balance centralised control with the innovative capacity of the private sector, strengthen financial stability, inclusion, and competitiveness of the national monetary system. The findings provide a theoretical basis for further development of regulatory and technological solutions in the field of central bank digital currencies.