CBDC

CBDC stands for central bank digital currency, a digital form of a country's sovereign money that is a direct liability of the central bank. It is intended for general use by households and businesses (retail CBDC) or by financial institutions for wholesale settlements. Unlike private cryptocurrencies or stablecoins, a CBDC is issued and backed by the state and remains part of the official monetary system.

CBDCs can be designed as account-based or token-based, and may use centralized or distributed ledger technologies. Retail CBDCs aim for broad access through wallets or banks, possibly with offline features; wholesale CBDCs are intended for settlement between financial institutions and central banks or large value transfer systems.

Benefits commonly cited include faster payments, lower settlement costs, improved financial inclusion, and enhanced transmission of monetary policy. Potential risks include financial stability concerns if deposits shift from banks to CBDCs, cybersecurity and privacy considerations, and the need for robust regulatory and legal frameworks.

Many countries are researching or piloting CBDCs. Notable examples include the Bahamas with the Sand Dollar, China’s digital yuan program, and ongoing studies by the European Central Bank on a digital euro, Sweden’s e-krona project, and various U.S. and other national experiments. No jurisdiction has universally adopted a CBDC, and designs vary by country.