CBDC (Central Bank Digital Currency) Explained

Tap a term to see what it means.

What Is a CBDC

A central bank digital currency is a digital form of a country's official currency, issued and backed directly by its central bank, functioning as a digital equivalent to physical cash rather than a private or decentralized asset.

CBDC vs. Cryptocurrency

Unlike cryptocurrencies such as Bitcoin, which are typically decentralized and not backed by any government, a CBDC is centrally issued and controlled by a country's central bank, with its value tied directly to the national currency.

Retail vs. Wholesale CBDCs

A retail CBDC is designed for use by the general public for everyday transactions, while a wholesale CBDC is intended for use between banks and financial institutions to settle large transactions more efficiently.

Why Countries Are Exploring CBDCs

Central banks cite potential benefits including faster and cheaper payments, greater financial inclusion for people without bank access, and maintaining monetary sovereignty as private digital payment options and cryptocurrencies grow more popular.

Common Concerns About CBDCs

Widely discussed concerns include privacy, since a CBDC could potentially allow more detailed tracking of individual transactions than cash, as well as questions about the impact on commercial banks' role in the financial system.

A growing but still largely experimental area of finance

As of the mid-2020s, dozens of countries have launched CBDC pilot programs or research initiatives, though most are still exploring implementation details, and only a small number have moved to full nationwide rollout, making this an area of finance that continues to evolve rapidly.

Frequently Asked Questions

Is a CBDC the same thing as a bank app or existing digital payment system?

No — existing digital payment apps typically move commercial bank money between accounts, while a CBDC represents a direct digital claim on the central bank itself, similar in principle to holding physical cash issued by that central bank.

Will a CBDC replace physical cash?

Most central banks exploring CBDCs have stated they intend it to exist alongside physical cash rather than replace it entirely, though the exact future of cash use varies significantly by country.