A retail central bank digital currency (CBDC) is a digital form of fiat currency that is issued and backed by a central bank, and is intended for use by the general public as a means of payment for goods and services. Unlike cryptocurrencies such as Bitcoin, retail CBDCs are backed by a government or central authority, and are therefore considered to be a form of legal tender.
Retail CBDCs are designed to be used in the same way as physical cash, but with the added convenience of digital transactions. They could potentially offer benefits such as increased efficiency and security, as well as reducing the costs associated with physical cash handling and storage.
Central banks around the world are currently exploring the possibility of launching retail CBDCs, and several countries, such as China and Sweden, are already piloting or testing their own digital currencies. However, there are also concerns around the potential impact on financial stability, privacy, and the role of banks in the payment system.
Further examples for retail CBDC innitiatives include:
- China's Digital Yuan: China's central bank, the People's Bank of China, has been conducting trials of its digital currency electronic payment (DCEP) system since 2020. The digital yuan is being tested in various cities, and is being used for retail transactions such as grocery shopping and public transportation.
- Sweden's e-krona: The Swedish central bank, the Riksbank, has been exploring the possibility of launching an e-krona since 2017. In 2021, it began testing a pilot project for the digital currency, which is being used for small retail transactions.
- The Bahamas' Sand Dollar: The Central Bank of The Bahamas launched the Sand Dollar, a digital version of the Bahamian dollar, in 2020. The Sand Dollar is being used for a variety of retail transactions, particularly in remote areas where access to traditional banking services is limited.
- The Eastern Caribbean Central Bank's DCash: The Eastern Caribbean Central Bank (ECCB) launched DCash, a digital version of the Eastern Caribbean dollar, in 2021. DCash is being used in several countries in the Eastern Caribbean region, and is intended to promote financial inclusion and reduce the costs associated with cash handling.
These are just a few examples of the retail CBDC initiatives that are currently underway around the world. Many other central banks are also exploring the possibility of launching their own digital currencies in the coming years.