How should central banks decide whether a retail CBDC or wholesale CBDC better fits their policy goals?

Central banks should start by separating retail and wholesale use cases. Retail CBDCs are meant for individuals and businesses, so they focus on payments access, inclusion, and everyday spending. Wholesale CBDCs serve financial institutions and are better suited to settlement, foreign exchange, and interbank transfers. The right choice depends on whether the primary goal is public access or market infrastructure efficiency.

How the policy goal should drive the CBDC model

The decision starts with the policy outcome the central bank wants to change. If the goal is to widen public access to payments, improve inclusion, or reduce frictions in everyday retail spending, a retail CBDC is the closer fit. If the goal is to improve settlement efficiency, support interbank transfers, or modernise market infrastructure, a wholesale CBDC is the stronger match. The model should follow the intended policy lever, not the technology label.

A useful way to test fit is to ask who must hold the instrument and who must be able to move value with it. Retail CBDC changes the end-user payment experience and therefore raises questions about usability, access, and public adoption. Wholesale CBDC leaves the public out of scope and concentrates on institutional flows, so its success is measured more by settlement speed, liquidity management, and interoperability with existing financial market rails.

That distinction matters because the same central bank can have multiple policy goals that do not point to the same design. A retail model can be justified for inclusion or resilience in domestic payments, while a wholesale model can be justified for reducing frictions in large-value transfer or cross-border settlement. The right answer is rarely “CBDC in general”, it is which market problem the central bank is trying to solve.

What changes between retail and wholesale design choices

Retail CBDC is a public-facing monetary instrument, so the design questions expand beyond core payment function. Central banks must consider access model, distribution model, wallet or account design, privacy expectations, transaction limits, and whether intermediaries will handle onboarding and servicing. Those choices affect uptake and also determine whether the CBDC complements or competes with existing bank deposits and payment services.

Wholesale CBDC is narrower in scope but more demanding in institutional integration. It must fit the settlement logic of banks, payment operators, and financial market infrastructures, often with a focus on atomic settlement, intraday liquidity, and operational reliability. The policy case is usually strongest where existing settlement arrangements create cost, timing, or counterparty frictions that a tokenised or ledger-based wholesale instrument can reduce.

The practical implication is that central banks should not compare the two models only on technical sophistication. Retail CBDC is judged by public utility and broad policy reach, while wholesale CBDC is judged by the efficiency gains it can deliver inside the financial system. A model that scores well on one dimension may be a poor fit for the other.

How to assess whether the benefits justify adoption

The right assessment method is to define the policy objective, identify the primary users, and then test whether the CBDC would materially improve the current system. If the main problem is access, resilience, or payment inclusion, retail design deserves priority. If the main problem is settlement friction, liquidity optimisation, or market infrastructure modernization, wholesale design usually offers a cleaner policy match.

Central banks should also separate direct benefits from implementation complexity. Retail CBDC can be politically and operationally attractive, but it often requires deeper choices about distribution, privacy, and public acceptance. Wholesale CBDC may appear simpler because the user base is smaller, yet it still depends on alignment with banks, payment systems, and legal finality arrangements. In both cases, the more precise the policy goal, the easier it is to judge whether the CBDC model is worth the institutional cost.

For decision-making, the key test is whether the proposed CBDC would improve an existing failure point or only add another payments option. If existing retail payment systems already meet the access goal, the case weakens. If current wholesale settlement arrangements already deliver efficient finality, the case also weakens. The chosen model should solve a genuine policy gap, not simply introduce a new rail.

Risk and Threat Considerations

The main risk is misalignment between the CBDC model and the policy objective. A retail CBDC built to solve a wholesale market problem can create unnecessary public complexity, while a wholesale CBDC built to address inclusion can leave the original policy gap untouched. The result is often a system that is technically sound but politically or operationally underperforming.

Failure mechanism: Central banks overfit the design to a preferred architecture instead of the targeted policy outcome, then discover that the chosen user base, operating model, and governance structure do not support the intended effect.

Impact: The programme can lose credibility, absorb implementation cost without delivering the expected benefit, and create avoidable friction with existing payment, banking, or settlement arrangements.

Standards & Framework Alignment

This section maps relevant standards and security frameworks to the operational risks and controls described in this guidance.

NIST CSF 2.0 sets the technical controls, while ISO/IEC 27001:2022 defines the regulatory obligations.

Framework	Control / Reference	Relevance
NIST CSF 2.0	GV.OC-01 — Organizational Context	CBDC choice depends on the policy objective and intended stakeholder group.
	GV.RM-01 — Risk Management Strategy	The decision requires weighing benefits, trade-offs, and implementation cost against the policy goal.
	ID.BE-01 — Asset Management	Retail and wholesale CBDC address different user bases and payment/settlement environments.
Recommendation — Define the policy objective and stakeholder context before selecting retail or wholesale CBDC. Compare expected policy gains against implementation and operational risk before committing. Map the target users and payment infrastructure to the CBDC model that best fits them.
ISO/IEC 27001:2022	A.5.1 — Policies for information security	CBDC selection is a policy-driven design choice that needs documented objectives and governance.
Recommendation — Document the CBDC policy goal and use it to govern model selection.

Practitioner Guidance

What to verify: Start with a written policy objective that names the target user group, the failure point in the current system, and the outcome the CBDC is expected to improve. If those three elements are not clear, the retail versus wholesale decision is premature.

Decision rule: If the primary policy value is public access, inclusion, or everyday payments, give retail CBDC the lead. If the primary value is settlement efficiency, liquidity management, or market infrastructure improvement, prioritise wholesale CBDC.

What good looks like: The chosen model has a direct line from policy goal to user base to operating design, with no major dependency on vague secondary benefits to justify adoption.

Practitioner takeaway: The most common mistake is treating retail and wholesale CBDC as alternative versions of the same thing; they are different policy instruments, and the better fit is the one that most directly changes the system the central bank is actually trying to improve.