CBDC News

Central Bank Digital Currencies (CBDCs) are the closest form of crypto supported by many governments worldwide. The concept of CBDCs utilizes blockchain and distributed ledger technology like cryptocurrencies. However, they are somewhat different from traditional digital assets because they are issued by a central bank or a similar governing authority. In a sense, a CBDC is a stablecoin since it is backed 1:1 to the official fiat currency of the issuing country. CBDCs offer a stable blockchain-based alternative to decentralized cryptocurrencies and stablecoins issued privately.

While China was one of the leading countries in terms of CBDC development, several other central banks are in different phases of exploration. Although they are more stable and secure since they are backed by an official government agency, CBDCs remain a concern to the crypto community. While most cryptocurrencies, including stablecoins, are decentralized, CBDCs can be modified to control usage. Also, since they are centralized, governments may have extensive oversight over transactions conducted. Some consider this feature a plus as it will help to prevent illicit activities, while others believe it is too much of a threat to individual privacy.

Nonetheless, there are a few key benefits of CBDCs. A major perk expected is cross-border payments. Since international transactions are slow, complicated, and expensive, using a CBDC could streamline this process by enabling transaction settlement between two or more central banks. In addition to these transactions, CBDCs can also significantly improve financial inclusion in parts of the world where access to financial services is limited. Other benefits include secure transactions and openness of operations, minimized trading costs, and accessibility of the global market by all small and large stakeholders.

Read the CBDC guide for more information about these government-issued cryptocurrencies.