CBDC (central bank digital currency)
Also called: CBDC · central bank digital currency · digital fiat
Definition
A CBDC (central bank digital currency) is a digital form of a country's official money issued and backed directly by its central bank, not by a private company.
This entry is shown in English.
How CBDC works
Cash is a direct claim on the central bank, while the money in your bank account is a claim on a commercial bank. A CBDC would give people or institutions a digital claim directly on the central bank. China's e-CNY pilot and the Bahamas' Sand Dollar are well-known examples, and the European Central Bank has been preparing a digital euro.
There are two main types. Retail CBDCs are meant for everyday payments by the public. Wholesale CBDCs are for settlement between banks and financial institutions. A CBDC may or may not run on a blockchain; many designs use a centralized ledger controlled by the central bank.
A CBDC is not a cryptocurrency like bitcoin, and it is not a stablecoin. Stablecoins such as USDT or USDC are issued by private companies and backed by their reserves. A CBDC is legal money issued by the state, which also raises debates about privacy, spending limits and the role of commercial banks. Designs and timelines differ widely by country.
Example
Imagine a country launches a retail CBDC with a holding limit of 3,000 units per person. You receive a salary of 4,000 units into your bank account and move 1,000 into your CBDC wallet to pay a shop. The shop receives the payment instantly in central bank money. If you tried to move another 2,500, only 2,000 would fit under the limit, and the rest would stay in your bank account.
Common mistakes
- Confusing a CBDC with a private stablecoin that only tracks the same currency.
- Assuming every CBDC runs on a public blockchain that anyone can inspect.
- Believing a CBDC can be traded on crypto exchanges like other tokens.
Learn and practise
FAQ
Is a CBDC a cryptocurrency?
No. A CBDC is official government money in digital form. It is centrally issued and controlled, unlike decentralized cryptocurrencies such as bitcoin.
What is the difference between a CBDC and a stablecoin?
A CBDC is issued by a central bank and is a direct liability of that bank. A stablecoin is issued by a private company and is only as reliable as its reserves and redemption process.