Central Bank Digital Currency (CBDC)

Subject – Economy

Context – RBI board discusses private cryptos, central bank digital currency

Concept –

The term central bank digital currency (CBDC) refers to the virtual form of a fiat currency.
A CBDC is an electronic record or digital token of a country’s official currency.
As such, it is issued and regulated by the nation’s monetary authority or central bank. As such, they are backed by the full faith and credit of the issuing government.
CBDCs can simplify the implementation of monetary and fiscal policy and promote financial inclusion in an economy by bringing the unbanked into the financial system.
Because they are a centralized form of currency, they may erode the privacy of citizens.
Although they aren’t formally being used, many countries are exploring the introduction and use of CBDCs in their economy.

Working of CBDC

Advantages of CBDC