CBDC
Central Bank Digital Currency
A digital form of national currency issued by a central bank as a direct liability to the holder. Used in retail and interbank settlements.
What is CBDC (Central Bank Digital Currency)?
A central bank issues a CBDC as an electronic equivalent of cash or commercial bank reserves. Unlike stablecoins, a CBDC has no private issuer carrying market risk: the central bank's liability is nominally equal to the amount in circulation.
## How it works
A CBDC can be retail (for individuals and businesses) or wholesale (for settlements between banks and financial institutions). A retail model may use a two-tier distribution scheme: the central bank issues the currency, while banks or payment providers provide access to wallets and transactions.
## Where it is found
Pilot and live projects exist in several jurisdictions, including the digital yuan (e-CNY) and the digital ruble. The digital euro and other projects are at the discussion or preparation stage. Project status changes often, so check current official sources before working with a specific jurisdiction.
## Impact on payments and crypto
The emergence of CBDCs changes requirements for payment infrastructure: integration with new wallets, rules for instant transfers, and source-of-funds controls. For the crypto sector, the key issues are competition with stablecoins and how their issuers and bridges to CBDCs will be regulated.
## Common mistakes
Confusing a CBDC with cryptocurrencies that have no central issuer, such as bitcoin. Assuming a CBDC is automatically anonymous: most models apply AML and KYC requirements as well as travel rule obligations between providers. Treating one project as typical for all countries.
FAQ
Is a CBDC the same as a cryptocurrency?
No. A CBDC is issued and guaranteed by a central bank, while cryptocurrencies are typically issued in a decentralized way or by private companies without such a guarantee.
How does a retail CBDC differ from a wholesale one?
A retail CBDC is intended for ordinary users and businesses, while a wholesale CBDC is used for settlements between banks and financial institutions. Their goals and infrastructure requirements differ.
Will a CBDC replace cash and bank cards?
That depends on the decision of the specific regulator. Many projects are designed to complement cash and non-cash instruments rather than fully replace them.