A CBDC, or Central Bank Digital Currency, is a type of digital currency that is issued and regulated by a country’s central bank. Unlike cryptocurrencies like Bitcoin, which are decentralized and often subject to high volatility, CBDCs are official government currencies, with all the legal recognition and regulation that comes with it. The purpose of a CBDC is to provide a digital form of a country’s fiat currency.
There are multiple potential advantages to CBDCs. They can offer improved payment efficiencies, reduce the costs associated with the production and distribution of physical currency, and enable easier and more accurate tracking of financial transactions. Some also see them as a way for central banks to maintain control of monetary policy in an increasingly digital world.
However, the implementation of CBDCs also comes with challenges. There are significant considerations related to privacy, security, and the potential impacts on the banking system.