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A central bank digital currency (CBDC) (also called digital fiat currency[1] or digital base money)[2] is a digital currency issued by a central bank,[3] rather than by a commercial bank. It is also a liability of the central bank and denominated in the sovereign currency, as is the case with physical banknotes and coins.

Rather than a new currency, CBDC is a form of central bank electronic money that could be used by households and businesses to make payments. A report by the Bank for International Settlements states that, although the term "central bank digital currency" is not well-defined, "it is envisioned by most to be a new form of central bank money [...] that is different from balances in traditional reserve or settlement accounts.".[4]

The present concept of CBDCs differs from virtual currency and cryptocurrency in that a CBDC is or would be issued by a state.[4][5][6][7] Most CBDC implementations will likely not use or need any sort of distributed ledger such as a blockchain.[8][9][10]

Most Central Banks worldwide are now in various stages of their evaluation of launching their national digital currencies.[11] According to ECB's chief Christine Lagarde, more than 80 central banks are looking at digital currencies.[12][13] China's digital RMB was the first digital currency to be issued by a major economy.[14][15] As of January 2023, five central banks have launched a CBDC: the Central Bank of The Bahamas (Sand Dollar), the Eastern Caribbean Central Bank (DCash), the Central Bank of Nigeria (e-Naira), the Bank of Jamaica (JamDex), and the Reserve Bank of India (Digital Rupee).[16]

Some states have also issued, or have considered issuing, cryptocurrencies: these include Venezuela (Petro) and the Marshall Islands (Sovereign). These cryptocurrencies are often considered with the intent of increasing a state's independence from global financial systems, such as by reducing dependence on a foreign currency or by evading international sanctions.[17][18]

Contrasting attitudes towards digital currencies were demonstrated by developments in the UK and Switzerland in February 2023. The UK Treasury and the Bank of England said a state-backed digital pound was likely to be launched some time after 2025. Two weeks later, a Swiss lobby group triggered a national vote on maintaining a "sufficient quantity" of cash in circulation over fears that electronic payments make it easier for the state to monitor its citizens' actions.[19] In a comment on the British government’s plans, the BBC's Faisal Islam said the issue was about access to the data attached to every spending transaction, and whether people might choose to trust a global company more than the state: "The eye here is on maintaining UK monetary sovereignty against upheaval from the likes of Big Tech."[20]


See also: History of CBDCs by country

Central banks have directly implemented e-money previously, such as Finland's Avant stored value e-money card in the 1990s.[21] In 2000, the I LIKE Q [cs] project was launched in Czechia,[22][self-published source?] enabling the implementation of so-called micropayments on the Internet. For payments, users used the virtual currency Q, the fair value of which is tied to a fixed exchange rate against the Czech koruna in the ratio of 100 Q = CZK 1. The two currencies are fully convertible. The author of the project was Pepe Rafaj [cs]. Project I LIKE Q was terminated in 2003 due to an amendment to Czech law, which at that time did not provide for this form of payment. In 2021, the same group introduced project Corrency [cs] which is a type of digital currency enriched with smart contracts aka drone money.

The present concept of "central bank digital currency" is known concept in the field of economics, whereby the central bank enables citizens to hold accounts with it, providing a reliable and safe public savings or payments medium ("retail" or "general-purpose" CBDC).

The Bank for International Settlements (BIS) published a report in December 2020 listing the known CBDC wholesale and retail projects at that time.[23] By April 2021, there would be "at least 80 central banks around the world that are looking at digital currencies."[12]

Another 2020 BIS survey found that 86% of central banks were examining the advantages and disadvantages of launching CBDCs,[24] although only 14% were in advanced stages of development (such as pilot programs).[25]


A central bank digital currency would likely be implemented using a database run by the central bank, government, or approved private-sector entities.[8][9][10] The database would keep a record (with appropriate privacy and cryptographic protections) of the amount of money held by every entity, such as people and corporations.[8]

In contrast to cryptocurrency, a central bank digital currency would be centrally controlled (even if it was on a distributed database), and so a blockchain or other distributed ledger would likely not be required or useful - even as they were the original inspiration for the concept.[8][9][10]


A CBDC is a high-security digital instrument; like paper banknotes, it is a means of payment, a unit of account, and a store of value.[26] And like paper currency, each unit is uniquely identifiable to prevent counterfeiting.[27] CBDC will have implications for commercial banks, probably in the field of lowering banks' commissions, no big customer data-selling ability, accumulating the deposits and deposit policies and credit policies due to higher funding costs for banks.[28]

Digital fiat currency is part of the base money supply,[29] together with other forms of the currency. As such, DFC is a liability of the central bank just as physical currency is.[30] It is a digital bearer instrument that can be stored, transferred and transmitted by all kinds of digital payment systems and services. The validity of the digital fiat currency is independent of the digital payment systems storing and transferring the digital fiat currency.[31]

Proposals for CBDC implementation often involve the provision of universal bank accounts at the central banks for all citizens.[32][33]

Benefits and impacts

Central bank digital currency are being studied and tested by governments and central banks in order to realize the many positive implications it contributes to financial inclusion, economic growth, technology innovation and increased transaction efficiencies.[34][35] Here is a list of potential advantages:


Despite having potential advantages, CBDCs remain a controversial topic, and there are risks associated with their implementation.

Indeed, in the last century, commercial banks have created money thanks to deposits in addition to a number of other ways. Formally they have used 2 methods: fractional reserve banking and zero reserve.

Zero reserve: Today, commercial banks in some countries (US, UK, EU, etc) don't need a reserve requirement anymore.[50][51][52][53] Indeed, every time a subject (a person, a corporation, etc) asks for a loan, and that subject offers a loan guarantee (a private property like a car, a building, etc), the bank temporarily creates a new deposit (money), lends this money to them, and when the borrower pays off the loan plus the interest the initial deposit is deleted, and the bank keeps the interest.

In the real world, zero reserve and fractional reserve are the same, because the banks are able to avoid the reserve requirements.

CBDCs are fully reserved, so if a person wants this form of money, they just buy it from the central bank. In this case commercial banks don't create debt or new money, and they don't earn any interest.

Customers may deem the safety, liquidity, solvibility, and publicity of CBDCs to be more attractive,[54] weakening the balance sheet position of commercial banks.[55] In the extreme, this could precipitate potential bank runs[56] and thus make banks' funding positions weaker. However, the Bank of England found that if the introduction of CBDC follows a set of core principles, the risk of a system-wide run from bank deposits to CBDC is addressed.[57] A central bank could also limit the demand of CBDCs by setting a ceiling on the amount of holdings.[54]


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