Finance: Defining CBDCs

Jeremy Cole

Finance:

FINANCE: DEFINING CBDCS

FINANCE: DEFINING CBDCS CBDC stands for central bank digital currency. The term is used to describe an emerging new form of currency issued by central banks.

Although named as digital currencies, CBDCs are closer to fiat currencies than cryptocurrencies. They are in various developmental stages around the world at present.

Central Authority One of the primary differences between CBDCs and cryptocurrencies is that CBDCs come from a central authority, typically the issuing central bank of the relevant nation.

As a centralised form of currency, there

is some concern that CBDCs may erode citizens’ privacy; however, they also have the potential to increase financial inclusion by bringing the unbanked into the central financial system and simplifying fiscal and monetary policy.

Virtual Fiat Currency Unlike cryptocurrencies, which are financial assets, CBDCs are virtual forms of fiat currency and operate in the same way. $10 of CBDCs

will always be worth $10 in just the same way as a $10 bill will always be worth $10.

CBDCs have the full faith and credit of the central issuing bank.

The G7 nations have recently issued a series of guidelines and policy regulations surrounding potential CBDCs.

JEREMY COLE You can read more about this by visiting the blog of Jeremy Cole, Red Rose co-founder.