What Are Central Bank Digital Currency (CBDC) ?
Central Bank Digital Currency (CBDC) is a digital form of a country's official currency that is issued and regulated by the central bank, which is the highest monetary authority in a nation. Here are the key details about CBDC:
1. Official Digital Currency: CBDC represents a nation's official fiat currency in digital form. It's a digital representation of the same currency you use in physical cash and bank accounts, such as the US dollar, euro, yen, or any other official currency.
2. Central Bank Control: Unlike cryptocurrencies like Bitcoin, CBDCs are centralized, meaning they are issued and controlled by the central bank of a country. The central bank has complete authority over the issuance, distribution, and regulation of CBDC.
3. Legal Tender: CBDC is considered legal tender, just like physical banknotes and coins. This means it can be used to settle financial transactions, pay taxes, and meet all financial obligations within the country where it is issued.
4. Digital Payments: CBDC is designed to facilitate digital payments and transactions. It can be used for online purchases, peer-to-peer transfers, and other digital financial activities.
5. Operates in Existing Financial System: CBDCs are integrated into the existing financial infrastructure. They coexist with traditional bank accounts, payment systems, and financial institutions.
6. Government-Backed: The value of CBDC is guaranteed by the government and the central bank, just like physical currency. It is not subject to the high volatility often associated with cryptocurrencies.
7. Security and Privacy:
8. Cross-Border Transactions: CBDCs have the potential to simplify and expedite cross-border transactions and international trade, as they are not subject to currency conversion and can be used for global payments.
9. Monetary Policy Tool:
10. Financial Inclusion:
11. Government Objectives:
