A Central Bank Digital Currency (CBDC) is a digital form of a country's fiat currency that is issued and backed by its central bank. Unlike cryptocurrencies such as Bitcoin and Ethereum, CBDCs are issued by a government authority and have the same legal tender status as traditional fiat currency.
CBDCs can take different forms depending on the design and implementation of each country's central bank. Some CBDCs may be issued in a decentralized blockchain network, while others may be centralized and controlled by the central bank.
The main purpose of a CBDC is to provide a secure and efficient means of payment that can be used in digital transactions. It also allows for greater financial inclusion by providing access to banking services for people who are unable to access traditional banking systems.
CBDCs are still in their early stages of development, and several countries are exploring the potential benefits and challenges of implementing a CBDC. Some countries have already launched pilot programs or are actively working on developing their own CBDCs.
There are several notable countries that are actively working on developing or testing their own CBDCs. Some of the most notable examples include:
- China's Digital Currency Electronic Payment (DCEP) - This is one of the most advanced CBDC projects in the world, with the People's Bank of China having conducted several pilot tests of the digital yuan in various cities since 2020.
- Sweden's e-krona - The Riksbank, Sweden's central bank, has been exploring the possibility of issuing an e-krona since 2017 and has conducted several pilot tests.
- The Bahamas' Sand Dollar - The Central Bank of the Bahamas launched its CBDC, the Sand Dollar, in 2020, becoming one of the first countries in the world to have a CBDC in circulation.
- The Eastern Caribbean Central Bank's DCash - This is a CBDC project that involves several countries in the Eastern Caribbean, and the DCash is currently being piloted in four countries.
- The European Central Bank's Digital Euro - The ECB has been exploring the possibility of issuing a digital euro and launched a public consultation on the matter in 2020.