Central Bank Digital Currency (CBDC)
Central Bank Digital Currency (CBDC) refers to a digital form of a country’s Fiat Currency, issued and regulated by the Central Bank. Unlike cryptocurrencies, CBDCs are centralized and aim to provide a stable digital payment option that complements physical cash. CBDCs can enhance payment efficiency, increase financial inclusion, and improve the effectiveness of monetary policy.
Examples and Cases:
- Digital Yuan: China has been actively developing the Digital Currency Electronic Payment (DCEP), which aims to replace cash and facilitate transactions in a more efficient manner.
- Sand Dollar: The Bahamas has implemented the Sand Dollar as a CBDC, designed to increase financial access for its citizens, especially in remote areas.
- e-Krona: Sweden’s Riksbank is exploring the e-Krona to address declining cash usage and ensure that the Central Bank retains control over the monetary system.