Central Bank Digital Currencies (CBDC) are digital currencies created and run by the central banks of the world, like the Federal Reserve in the U.S. or the Bank of England in the UK.
The primary difference between a CBDC and a “regular” cryptocurrency is that the CBDC will have the backing of a nation’s monetary authority and national currency.
CBDCs are traditional money, just in digital form, so they are a store of value and a way to make payments.
The feverish spread and popularity of cryptocurrencies have forced many central banks to reassess their own adoption of newer and faster technology to run the banking systems of the future.
Central banks don’t want to be left behind and they don’t want to lose control of their country’s monetary supply.
CBDCs may or may not rely on blockchains or distributed ledgers.
China was the first country to openly run a test pilot of a digital yuan in a small segment of their population. The test centered around handing out fixed amounts of e-CNY to participants to see how they would spend the digital currency.
The Bahamas became the world’s first country to issue a CBDC covering the entire country. It’s called the Sand Dollar.
The United States, Canada, Mexico, United Kingdom, Jamaica, Sweden, Russia, Nigeria, India, and Eastern Caribbean Union are all in some phase of testing as of August 2022.
