What are central bank digital currencies?

What are central bank digital currencies?

What are central bank digital currencies?

Central bank digital currencies, or CBDCs, are an attempt to bring some of the purported upsides of private digital currencies to the world of public money, under the auspices of national central banks. This also means that CBDCs will, in theory, be safe in times of financial crisis.

Comparisons are often made with cryptocurrencies, as some proposed CBDCs could make use of the same blockchain technology. This is not necessarily the case, however. In fact, unlike the best known blockchain — that used by bitcoin — which is essentially a decentralised database, central banks in most cases are likely to control their own private blockchains.

How far have plans progressed?

While there are few fully developed and deployed CBDCs, several countries have initiatives at advanced stages. In China, the e-yuan CBDC is one of the most advanced among large economies. In February, the government handed out lunar new year “red packets” containing the digital coins to encourage uptake.

One of the few countries with a fully deployed CBDC is the Bahamas, whose Sand Dollar was piloted in 2019 and launched properly a year later, as a collaboration between the central bank, payment card group Mastercard and digital payments platform