Central Bank Digital Currencies
To provide a detailed overview of central bank digital currencies (CBDCs), covering their rise to popularity, participating nations, key success factors, uses, links to nationalism, and potential impact on international payment players such as MasterCard.
- Central bank digital currencies (CBDCs) are similar to traditional money, but they exist in digital form and are issued by a country’s central bank. They promise to provide cash-like safety and convenience for peer-to-peer payments.
- CBDCs are built on the blockchain technology, but unlike cryptocurrencies which are designed to be decentralized and exist in the shadow economy, CBDCs are centralized, governed, and backed by the central bank of a country. When fully implemented, CBDCs are expected to function as a wholly new legally accepted money tender similar to cash, cheques, and promissory notes.
- Although they will operate similarly to electronic cash or wallets, they are not mere representations of cash as they serve to act as digital alternatives and are not in anyway tied to cash. Central banks are experimenting with CBDCs because they believe it is capable of making payments systems more efficient and reduce transfer and settlement times.
- Several central banks have begun to experiment with CBDCs while few others have publicly announced that they are actively considering it. China is believed to currently lead other countries in this regard. Analysts believe the world's first CBDC issuance by the People’s Bank of China is imminent.
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