What is the concept of the Central Bank digital currencies?

[Lens1000]

The concept of Central Bank digital currencies and its potential impact on traditional banking system is very important for us to understand. It is a significant evolution of the fiat currency in the country.

The digital currencies have a great potentials in transforming the financial landscape because it is going to reduce cost of transactions and it will enhance financial inclusion. One of the most important thing that we should look at in the Central Bank digital currency project is that it addresses the rise of digital payments and it also maintain Central Bank control. It serves as a digital counterpart to the physical cash that we are used to.

 

[Suba]

CBDC is a type of digital currency that is operated on a private blockchain which is issued and controlled by a central bank. CBDC can also be used as a means of payment, whether buying goods or making transfers, so it functions to replace currency (paper money and coins). Like fiat money, CBDC is also a representative currency of a country. CBDC has also fulfilled standard functions as a currency such as unit of account, store of value and medium of exchange. If CBDC is distributed in a country, it will certainly become a tough competitor to ewallet platforms. So basically the CBDC concept is regulated by the central bank, be it the money supply, network, while CBDC holders will be tied to their bank accounts.

 

[btaliat]

Central Bank Digital Currency was established in order to counter the development of cryptocurrency. It was China that started popularizing it then with the sole aim of weakening the crypto. Most government believe the crypto is taking over most fiat currencies and that many people prefer saving in the form of crypto rather than saving in banks.

This development makes the government to start working towards the crashing of crypto thereby introducing CBDC. It was a success at a start in some countries while remain a total failure in most countries as citizens do not embrace it as it gives government much access to their monetary transactions.