Central Bank Digital Currency (CBDC)
Central Bank Digital Currency (CBDC) is issued and supported by the government's central bank, which means that the central bank bears all debt liability, not the individual's electronic wallet.
As decentralized digital currencies such as Bitcoin become increasingly popular, central banks around the world are beginning to realize that they must either get in on the game or let the opportunity of currency evolution pass them by.
What is CBDC?
Central Bank Digital Currency (CBDC) is the digital form of a country’s legal currency and is also the claim of the central bank.
Instead of traditional printed paper money, central banks issue electronic coins or currency that are backed by the government's credit.
Issuing a CBDC creates a central bank debt, meaning the government must maintain reserves and deposits to back it, rather than leaving it to private banks.
The Riksbank is the central bank that has done the most work in this area so far, and the European Central Bank is also moving quickly.
The Bank for International Settlements released a joint report with Sweden's Riksbank, Federal Reserve , European Central Bank, Bank of England , Bank of Japan , Bank of Canada and Swiss National Bank to discuss the core characteristics of a CBDC.
Recently, The People's Bank of China (PBOC) issued digital RMB worth 10 million yuan to 50,000 people in the Shenzhen area.
This is the latest in a series of trials of China’s new Digital Currency Electronic Payments (DCEP).
The People's Bank of China (PBOC) has released a draft law that will give the Digital Currency Electronic Payment (DCEP) system legal status and allow the digital yuan to be circulated and converted like a physical currency for the first time.
The central government has made it clear that the goals of DCEP include replacing cash, maintaining government control of the currency, and creating as many small retail application scenarios as possible.
China also hopes to internationalize the renminbi by strengthening its use in international settlements.
Further progress on CBDC implementation may raise questions about the impact of on monetary policy and exchange rates.
