A central bank digital currency (CBDC) is a digital version of national money that the central bank itself issues. Unlike Bitcoin, which has no central authority, here the central bank is the issuer and complete overseer, and, like banknotes, it is a direct liability to the holder.
Difference from ordinary cryptocurrency#
- The issuer is a government body and it operates in a fully centralized way
- Its value is the same as the official currency and, unlike Bitcoin, it does not fluctuate in price
- It may use blockchain technology or traditional systems
- Transparency and privacy differ depending on each country's design
Difference from a bank balance#
The balance in your bank account is a liability of a commercial bank, but a CBDC is a direct liability of the central bank, with no commercial intermediary. It is like holding banknotes, only in digital form.
Example#
A citizen who holds digital currency in a mobile app can pay at a shop without a bank card, and the amount moves directly from the official wallet.
Why does it matter?#
Governments are exploring it to make payments cheaper, reduce cash use, and enable greater oversight. Critics warn about the potential loss of privacy. Details vary from country to country, so it is best to get information about any particular one only from that country's official sources.