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A Central Bank Digital Currency (CBDC) is a digital currency issued and controlled by a country’s central bank. It can be thought of as a direct digital form of fiat currency (e.g., dollars, euros), which will exist alongside current physical cash and bank account money. CBDC uses the benefits of blockchain technology in cryptocurrencies, but it is not decentralized—instead, it is fully controlled by a central bank.

1. What is CBDC and its key features

A CBDC is a sovereign currency that is directly liable to a central bank. It can come in two main forms. It is used for interbank transactions and reserve settlement between commercial banks and financial institutions. Its goal is to improve current complex and time-consuming clearing and settlement systems. It is designed for everyday use by the general public and businesses. It will function like physical cash. Retail CBDCs can be used by ordinary people by opening an account directly with the central bank (or through another intermediary).

Key Differences (CBDC vs. Other Digital Money)

Features	CBDC	Commercial Bank Deposit (ATM/Debit Card)	Cryptocurrency (BTC/ETH)
Issuance and Regulation	Central Bank	Commercial Bank	Decentralized Network
Liability	Directly liable to the central bank	Liable to commercial banks	Not a single entity
Stability	Stable (Risk-free) with fiat currency	Stable	Generally volatile

2. Objectives and Benefits of CBDCs

Various central banks are showing interest in launching CBDCs for various reasons. CBDCs can be used to provide access to financial services through digital wallets without a bank account. CBDC transactions can be completed faster and at lower costs than traditional banks or payment gateways. Using CBDCs from different countries can make international transactions (Cross-Border Payments) faster and cheaper, which is important for remittance flows. There is a risk of losing customers’ money if a commercial bank goes bankrupt. Since CBDCs are directly the responsibility of the central bank, this risk is not there. CBDCs provide a government alternative that can counter the popularity of privately issued cryptocurrencies (such as stablecoins) while maintaining market stability and control.

3. Global Status

About 90% of the world’s central banks are in the research, pilot or development stage of CBDCs. China is at the forefront of CBDC implementation. It has launched a large-scale pilot program for retail CBDCs and is testing it with millions of users. China aims to use it in international trade. It became the first country in Africa to launch a retail CBDC in 2021. It became the first country in the world to officially launch a retail CBDC in 2020. The Federal Reserve is actively researching, but has not yet made a final decision on its launch. It is deeply analyzing the risks and impacts of a retail CBDC. The European Central Bank (ECB) has begun preparatory work on the launch of a digital euro. The Reserve Bank of India (RBI) has launched pilot programs for both wholesale and retail CBDCs and is gradually expanding its scope.

4. Risks and Concerns

Despite the benefits of CBDCs, there are some concerns about them. If the central bank can track every transaction, it could put citizens’ financial privacy and freedom at risk. If retail CBDCs become too popular, people could withdraw their money from commercial banks and put it in CBDCs, which could undermine the stability of the banking system. As with any centralized system, there are risks of cybersecurity or technical failures in CBDC platforms. CBDCs are undoubtedly going to be an important part of the modern financial system. Their implementation will depend on each country’s own economic and political context. Today's discussion concludes here. I hope you've found it interesting. Please share your thoughts on today's topic. Prayers for everyone. May everyone be well. Amen.

Me behind the camera & keyboard

I’ve always loved sharing my passions with you — from crypto and movie reviews to photography, storytelling, and blogging. Now, continuing that creative journey, I’ve stepped into a brand-new world — Gaming ! 🎮 | 🎥 On my YouTube channel Bokhtiar The Survivor — I’m consistently working to bring you the raw thrill of my gaming experiences — the emotions, the excitement, and those unforgettable moments that make every game feel alive.