Central Bank Digital Currency (CBDC) refers to a digital form of sovereign currency issued by a country’s central bank. CBDCs are designed to represent the traditional fiat currency in a digital form, providing a secure and efficient means of transacting in the digital economy.
One key characteristic of CBDC is that it is issued and regulated by the central bank of the respective country, distinguishing it from cryptocurrencies like Bitcoin which are decentralized and not governed by any central authority. CBDC aims to combine the benefits of digital currency with the stability and trust associated with traditional fiat currency.
CBDCs can be used for various purposes, including facilitating payments, reducing transaction costs, improving financial inclusion, and potentially enhancing monetary policy effectiveness. Central banks are exploring the possibility of issuing CBDCs as a way to modernize the existing financial system and adapt to the changing landscape of digital payments.
Overall, CBDC represents an innovative approach to digital currency that leverages the advancements in technology to provide a secure and reliable form of digital money issued and regulated by a central authority.
