Introduction To Central Bank Digital Currency

Greetings everyone and thanks for all the support you showed me in my last post. I'm here again today to talk about Central Bank Digital Currency(CBDC).

INTRODUCTION

This is short for Central Bank Digital Currency(currencies). As the name suggests, it is a digital currency that is issued by the central bank of a country which means that it can be used to settle debts, make payments, and even as a means of storing value and is recognized as a legal tender. Its use is not only restricted to the issuer’s citizens but is acceptable worldwide.
As virtual currencies around the world continue to exponentially grow and take over the economy, countries around the world have used the initiative to create their digital currency which is similar to normal cryptocurrency but is more stable and secure

FEATURES OF CBDC

• It has to be a digital currency.
• It has to be issued by the central bank of a country.
• It must be universally acceptable.

• It must be centralized.

TYPES OF CBDC

• Wholesale CBDC which is used by banks for transactions.
  -Retail CBDC which is used by individuals(consumers) to make transactions.
  Wholesale CBDC: using wholesale CBDC, banking institutes will be able to carry out interbank payments which also speed up transactions with banks even in other countries because recently, settlement systems usually work with only one currency. Now this doesn’t sound like something unique in this recent times but wholesale CBDC have all the advantages of blockchain and other related technologies which make transactions easier, faster and more efficient
  Retail CBDC: this type of CBDC is for individuals(consumers). It is a form of digital money given out to individuals and organizations by the government and its authenticity and value are guaranteed.
  So far, only five CBDCs have been launched worldwide namely:
  China: Digital Yuan
  Sweden: e-krona
  Bahamas: Sand Dollar
  Eastern Caribbean Area: DXCD
  Marshall Islands: Sovereign

ADVANTAGES OF CBDC

• It operates on the blockchain which means that the transfer of fiat currency from one person or company to another is based on old fashioned financial services which have their limitations on the type of currency available and it does not support 24/7 support so individuals and organizations are limited to the working hours.
• Since has some of the features of blockchain, it can carry out transactions both locally and internationally in minutes unlike other antique systems which take a lot an of time.
• It’s more secure since it’s centralized, decisions and other things are taken by the issuer of the CBDC.
• It is legally acceptable worldwide and does not fluctuate like another decentralized cryptocurrencies.

DISADVANTAGES OF CBDC

• The issuer of the currency has complete control over the currency and can do whatever they want with it.

• It is less private for its users and they have to give out some sensitive information.
• There is the risk of scammers `programming’ money since it is digital.
  In conclusion, like fiat currency, CBDC are fast-growing and will soon take over fiat currency and we know that anything that has an advantage will have a disadvantage because this can bring about unemployment as there would be no more need for banks and all transactions would be monitored and there would be no privacy. In my next post i am going to talk about fiat currency and its relation to CBDC thank you for your time.