What is Central Bank Digital Currency (CBDC)?


Central Bank Digital Currency (CBDC) is a new form of digital money created by central banks. It is designed to be a more convenient and secure form of payment than traditional cash or card payments. CBDCs offer the potential to improve financial inclusion, reduce transaction costs, and provide a more efficient payment system. Additionally, CBDCs may offer more privacy and security compared to existing digital payment systems.


growing the number of banks that consider digital currencies with a hybrid or intermediary architecture to be promising. In this context, CBDC is a direct payment demand on the central bank, but the private sector controls the interaction with customers.

Only a few jurisdictions consider models in which the central bank plays a significant operational role in payments to customers.

Central banks are more likely to choose direct or hybrid/intermediary architectures in jurisdictions with a relatively high standard of living, broad public access to banking services, and effective public administration.

In less developed countries, central banks tend not to specify the architecture they choose.

Infrastructure (technical concept) CBDC

The infrastructure can be based on either a traditional centralized database or a distributed ledger (DLT).

Many banks are considering various technology options. However, the current CBDC concept trials are predominantly based on DLT rather than traditional technology infrastructure.

Central banks experimenting with DLT usually use permissioned systems, in which operators have the right to decide who to accept into the network.

Access technology and degree of anonymity of use

Account-based access technology

Account-based CBDCs are tied to identification information. The task of combining the qualities of cash as an inclusive and crisis-resistant means of payment with the characteristics of anonymity can be challenging.

This is the most popular concept – five central banks are considering it.

Based on tokens (token-based)

The access mechanism based on digital tokens allows the implementation of various value-oriented options for payment methods, for example, issuing prepaid CBDC banknotes. The latter can be exchanged both physically and digitally.

However, this comes with the risk of criminal activity and counterfeiting. In addition, access under such a scheme is difficult for people who are deprived of access to banking services and are forced to use only cash.

This concept is being considered by three central banks.

Can be used for domestic and/or cross-border payments

CBDCs can be used for domestic settlements or for cross-border payments. Accordingly, the digital currency model may provide for retail and wholesale interconnections and access options for residents or non-residents. The token-based domestic CBDC will be open to everyone, including non-residents.

Most projects lean towards internal use. The ECB, the central banks of France, Spain, the Netherlands, and the Eastern Caribbean Central Bank, by contrast, are focusing on the cross-border use of digital currencies.

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Central Bank Digital Currency (CBDC) is a new monetary system that holds the potential to drastically change the way money is used and exchanged in the digital world. CBDCs offer a new type of digital currency that has the potential to increase the security, efficiency, and accessibility of financial services around the world. While CBDCs are still in the early stages of development, it is clear that they have the potential to revolutionize the way we use and exchange money in the digital age.


What is Central Bank Digital Currency (CBDC)?



Central Bank Digital Currency (CBDC) is a digital version of a fiat currency, issued and backed by a central bank. It is a form of electronic currency that can be used to make payments and store value. CBDCs are designed to provide the same level of privacy, security, and convenience as traditional fiat currency, but with faster transaction speeds and lower transaction costs.

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