Central Bank Digital Currency (CBDC)
A digital form of a country's official currency issued and regulated by the central bank.
What is CBDC?
A Central Bank Digital Currency (CBDC) is a digital form of a country's sovereign currency issued directly by the central bank — the digital equivalent of physical banknotes, but in electronic form. Unlike private cryptocurrencies (Bitcoin, stablecoins), a CBDC is a legal tender liability of the central bank, carrying the same guarantees as physical cash. CBDCs can be designed for retail use (public transactions) or wholesale use (interbank settlements). Proponents argue CBDCs enable faster and cheaper payments, financial inclusion, and more efficient monetary policy transmission. Critics raise concerns about government surveillance, privacy, and disintermediation of commercial banks. As of 2024, over 130 countries are exploring CBDCs; China's digital yuan (e-CNY) is the most advanced major-economy CBDC in deployment.
Example
China's digital yuan (e-CNY) was piloted in major cities beginning in 2020, distributed through lotteries and used in retail transactions at millions of merchants. Unlike Alipay or WeChat Pay (which are private apps), the e-CNY is directly issued by the People's Bank of China, giving the government direct visibility into transactions and allowing programmable features like expiration dates on stimulus payments.