Central bank digital currency

(CBDC).

A CBDC is a digital currency issued and administered by a central bank.

For example, the Bahamanian Sand Dollar.

Important potential benefits of CBDCs include:

• Speed
• Transparency
• Reduced costs
• More efficient cross-border remittances

CBDC should anchor monetary stability & complement private sector activities

"In a recent presentation by Fabio Panetta (member of the Executive Board of the ECB), at the Annual Congress of the European Economic Association, he noted:

o Digital public money is the monetary anchor in a digital world.

o The importance of safeguarding monetary sovereignty.

o The need to enhance competition and efficiency in payments.

But also the importance that a CBDC was not too successful if it crowds out private sector activity."

ACT blog - Naresh Aggarwal - Central Bank Digital Currencies (CBDCs) and other digital currencies – September 2022.

Bank of England considering CBDC

"A Central Bank Digital Currency (CBDC) [in the UK] would allow households and businesses to directly make electronic payments using money issued by the Bank of England.

We have not yet made a decision on whether to introduce CBDC.

The Bank [of England] provides physical money in the form of banknotes, which can be used by households and businesses to make payments.

We also provide electronic money, but this can only be used by banks and selected financial institutions.

A Central Bank Digital Currency would make electronic money, issued by the Bank of England, available to all households and businesses.

This would allow everyone to make electronic payments in central bank money.

... CBDC is sometimes thought of as equivalent to a digital banknote, although in some respects it may have as much in common with a bank deposit.

Any CBDC would be introduced alongside – rather than replacing – cash and bank deposits."

Bank of England - 2020.

Improving cross-border payments

"Many central banks are researching CBDC, and there are clear opportunities for CBDCs to improve cross-border payments and protect monetary sovereignty."

Bank for International Settlements, Paper 115 - March 2021.

Supporting new technologies

"The introduction of a [UK] Central Bank Digital Currency would be a significant development which could help support the adoption of new technologies (e.g. blockchain) in financial services.

There is concern that retail CBDC could lead to increased data being held on the consumer. One option would be to follow the proof of concept developed by the European System of Central Banks, which explored allowing users to remain anonymous for low value transactions, but still maintaining AML/CTF checks for larger transactions, and ensuring that identity and transaction history were not available to central banks or the intermediaries."

Kalifa Review of UK Fintech - February 2021.

See also

• Account
• Altcoin
• Anti money laundering (AML)
• Bank of England
• Bank for International Settlements
• Bitcoin
• Blockchain
• Britcoin
• Central bank
• Central bank money
• Commercial bank money
• Countering terrorist financing (CTF)
• Crypto-assets
• Cryptocurrency
• Cryptography
• Currency
• Currency substitution
• Defaultable debt
• Deposit
• Digital currency
• Digital Dollar Project (DDP)
• Digital euro
• Digital public money
• Distributed ledger
• e-krona
• e-money
• Ether
• European System of Central Banks
• Fiat currency
• Gold standard
• Libra
• Monetary
• Money
• Multi-CBDC arrangement
• Payment Interface Provider (PIP)
• Project Icebreaker
• Project Mariana
• Proof of concept
• Regulated Liability Network (RLN)
• Retail central bank digital currency (rCBDC)
• Ripple
• Sand Dollar
• Sovereignty
• Stablecoin
• Unbanked
• Under-banked
• Wholesale central bank digital currency (wCBDC)

External links

• Policy panel on central bank digital currencies - Fabio Panetta - European Central Bank - August 2022

• New forms of digital money - Bank of England - June 2021

• Central bank digital currencies - Bank of England

• Bank of International Settlements, Central Bank Digital Currency

• ACT Webinar, Central Bank Digital Currencies, Overview of the Bank of England's Work, March 2021]