A central bank digital currency (CBDC) is a digital representation of a fiat currency that is issued by a nation’s central bank. These regulated e-currencies are used to facilitate transactions and provide liquidity to the economy.
The benefits of using a CBDC include increased efficiency, security and transparency for financial transactions, reduced cross-border payment costs and the ability to better manage macroeconomic conditions.
As a programmable currency, they may also serve to improve financial inclusion.
Some central banks have already launched digital currencies. Others are working to develop them. In the next few years, CBDCs will enter the mainstream as a viable fiscal and economic tool.
In October 2020, The Bahamas became the first jurisdiction to release a CBDC. The Sand Dollar enhances financial inclusion, lowers payment costs and improves transactional efficiency for all in the Commonwealth.
China is the first major economy to pilot a programmable CBDC, the e-CNY, on a large scale. South Africa is piloting a wholesale CBDC with the Khokha to reduce internet bank fraud. Numerous other pilot projects are also being carried out by central banks around the globe.
Find out the latest global CBDC developments:
The introduction of CBDCs will compel banks to rake new strategic and operational decisions.
Finding the right partner to advise and implement these changes is vital to a smooth transition.
CBDCs ARE CLASSIFIED INTO TWO GROUPS WITH DIFFERENT CHARACTERISTICS: