A Central Bank Digital Currency (CBDC) is a digital form of a country’s official currency, issued and governed by the central bank, offering a secure and stable means of electronic payment.

Central Bank Digital Currency (CBDC) Meaning

A Central Bank Digital Currency (CBDC) is the electronic form of a country’s fiat currency. It is issued and regulated by the country’s central bank. Unlike cryptocurrencies, a CBDC’s value is pegged to the nation’s physical money. This digital currency represents a secure and government-backed form of money in the digital realm.

Key Aspects of CBDCs

CBDC vs. Cryptocurrency

While CBDCs share similarities with cryptocurrencies, such as digital transactions and blockchain technology, they differ significantly in:

  1. Centralization: CBDCs are centrally managed, whereas cryptocurrencies are decentralized.
  2. Issuance: National banks issue CBDCs, while decentralized networks issue cryptocurrencies.
  3. Anonymity: Cryptocurrencies offer more privacy, while CBDCs require personal user information.
  4. Networks: CBDCs operate on permissioned blockchains, as opposed to the permissionless networks of cryptocurrencies.

Advantages of CBDCs

Potential Risks of CBDCs

As CBDCs are emerging, they face evolving policies and unforeseen challenges. Yet, countries are increasingly exploring this innovation, with over 100 nations considering its implementation.