Central bank digital currencies (CBDCs)

What is Central bank digital currencies (CBDCs)?

Digital forms of a country's official currency that are issued and regulated by the nation's central bank. They are designed to be a secure and efficient alternative to physical cash and traditional bank accounts, leveraging modern digital payment technologies. CBDCs aim to enhance payment systems, promote financial inclusion, and potentially provide a tool for implementing monetary policy more effectively. Unlike cryptocurrencies, CBDCs are centralized and maintain the same value as the fiat currency they represent, ensuring stability and trust in the currency.

Two primary models of CBDCs exist: retail (used by the public for everyday transactions) and wholesale (used between financial institutions for clearing and settlement). Retail CBDCs are seen as a tool for promoting financial inclusion, especially in regions with limited access to banking services. However, their deployment raises questions around privacy, data protection, and the evolving role of commercial banks.

As of today, many countries are exploring or piloting CBDCs through central bank research programs and international collaborations. The long-term impact of CBDCs will depend on their technical design, governance frameworks, and how they coexist with existing financial systems and private digital currencies. Successful integration may lead to more efficient payment infrastructures and increased resilience in national financial systems. At the same time, the rollout of CBDCs must address interoperability, cross-border use, and public trust to achieve broad adoption and long-term viability.