A central bank digital currency (CBDC) is a form of digital currency issued by a country’s central bank. It is similar to cryptocurrencies, except that its value is fixed by the central bank and is equivalent to the country’s fiat* currency.
Many countries are developing CBDCs, and some have even implemented them. Because so many countries are researching ways to transition to digital currencies, it’s important to understand what CBDCs are and what they mean for society.
*Most modern paper currencies are fiat currencies [for details here]
Note: I do not agree with how CBDCs are portrayed here, because it is actually the institutional point of view. Still, I think this article makes it easy to get a first glance on this topic.
For further reading this is the 2023 report of the Bank for International Settlements (BIS)
The following are from the Conclusions of this paper / survey:
CBDCs have become a topic of global interest. As of late 2023, 94% of 86 surveyed central banks were exploring a CBDC.
the likelihood that central banks will issue a CBDC within the next six years is now generally greater for wholesale than for retail CBDC.
more than half of central banks are considering a retail CBDC that is subject to holding limits, (…) When it comes to wholesale CBDCs, many central banks already consider themselves likely to embed interoperability and programmability
No limits on holdings are even considered for the big centralized entities in this 2-tier system. Apart from that and to my understanding, implementing this would mean that our digital wallets will be by default controlled by a bank, a government, both and/or another centralized entity. Let’s keep in mind that in these digital wallets, our digital IDs will be stored as well.
Of course the above don’t sound good to say the least. But we are not there yet. For this reason I believe it is important to keep an eye out on these topics and be informed on these developments, both locally and worldwide so that we can to do our part.
When I first heard about CBDCs I thought it was just for money that moves between the central bank and commercial banks. I didn’t think it was something anyone could partake in.
