CBDC Intermediate

A CBDC is legal tender in digital form, meaning it carries the same official status as physical cash issued by the same authority. This sets it apart from cryptocurrencies like Bitcoin, which are decentralised and not issued or backed by any government or central bank. It also differs from a privately issued stablecoin, which is typically created by a company and backed by reserves it holds, rather than being issued directly by a state authority. Central banks researching or piloting CBDCs generally build them on centralised or permissioned infrastructure, rather than the open, permissionless networks used by most public cryptocurrencies.

Central banks and governments cite several possible motivations for exploring CBDCs, including faster and cheaper payment systems, expanding access to financial services for people without a bank account, and maintaining monetary policy tools as cash use declines. At the same time, CBDCs have drawn debate over privacy, since a central bank could potentially have visibility into digital transactions in ways that physical cash doesn't allow, and over the possibility of programmable restrictions on how the currency can be spent. Different countries are approaching CBDC design differently, and specific features vary widely depending on each project's goals and stage of development.