What is a Central Bank Digital Currency (CBDC)?
CBDC stands for “Central Bank Digital Currency”, a new type of currency that governments around the world are experimenting with. What sets a CBDC apart from established currencies is that proponents hope it can use new payment technology, typically a blockchain, to potentially increase payment efficiency and lower costs.
This new type of currency is still early in its development. Most countries are still only starting to explore the idea, such as the U.S. and Australia in the form of a digital dollar. A few ambitious countries, including China with its digital yuan and South Korea, have already finished a demo and are piloting the technology. n many cases, a CBDC is like a hybrid of Bitcoin and a government-issued currency.
But a CBDC has yet to be deployed on a large scale.
Each country exploring a CBDC has its own approach. Several CBDCs are based on the same general principles and blockchain technology underlying Bitcoin, the original cryptocurrency.
Blockchain technology allows many different entities to hold a copy of a history of transactions so that history is distributed and not controlled by a single entity.
Several countries are known to be experimenting with blockchain-inspired CBDCs.
