What exactly is a Central Bank Digital Currency (CBDC)? A CBDC is virtual money backed and issued by a central bank. As cryptocurrencies and stablecoins have become more popular, the world’s central banks have realized that they need to provide an alternative—or let the future of money pass them by.
Blockchain has the potential to change the whole monetary and financial industry. But it still has a long way to go, as currently, the money issuance power still rests in hands of sovereign central banks. The compromised way of welcoming blockchain technology in the monetary and financial industry is the development of the central bank issued digital currency – CBDC.
For CBDC, the money issuance power is still controlled by the central bank. But it uses a new form of currency – cryptocurrency. It also needs a new blockchain system for money movement. The combination of new blockchain-based financial systems and traditional financial systems will soon be a reality in the form of these centrally backed stablecoins.
To better understand what is blockchain, we have listed important CBDC research papers and documents below:
(3) European Central Bank, Tiered CBDC and the financial system
(4) European Central Bank, Exploring anonymity in central bank digital currencies
(7) The Brookings Institution, The current landscape of central bank digital currencies
(12) Federal Reserve, The Digitalization of Payments and Currency: Some Issues for Consideration
(13) Accenture, The (R)evolution of money II Blockchain empowered CBDC
(14) Bank for International Settlements, Central bank digital currencies