What Is a Central Bank Digital Currency (CBDC)? Understand Its Types, Uses, and More
The post What Is a Central Bank Digital Currency (CBDC)? Understand Its Types, Uses, and More appeared on BitcoinEthereumNews.com.
The intersection of decentralized crypto and traditional finance is deepening, with billions in institutional money flowing into cryptocurrency and blockchain infrastructure. This trend has prompted governments globally to adopt two main strategies: bring in a clear set of rules for cryptocurrencies and actively develop their own Central Bank Digital Currencies (CBDCs). This article explains how CBDCs work, why they matter, and what their global rollout could mean for finance and individual privacy. What Is a Central Bank Digital Currency (CBDC)? Central Bank Digital Currency (CBDC) is a digital form of fiat currency issued by the central bank. Different from cryptocurrencies, CBDCs are centralized and backed by the government, making them a trusted payment method. Like fiat currencies, the value of CBDCs stays near-constant, but their purchasing power can change due to inflation, deflation, and monetary policies. Is CBDC A Cryptocurrency? CBDCs are government-issued digital cash that shares some features with crypto, but unlike decentralized cryptocurrencies, they are centrally controlled by a government authority. Does CBDC Use Blockchain Technology? While some countries experiment with permissioned blockchains or distributed ledger technology (DLT), others skip the tech entirely, opting for traditional centralized systems. Even when blockchain is used, it’s not always smooth sailing. A MIT and Boston Fed study found distributed ledgers can actually slow CBDCs down, creating unnecessary complexity when a simple centralized system would work better. They stated, “It creates performance bottlenecks and requires the central transaction processor to maintain transaction history, which one of our designs does not, resulting in significantly improved transaction throughput scalability properties.” Types of CBDCs Wholesale CBDCs Wholesale CBDCs were designed to be used by financial institutions like banks in order to settle high-value transactions more efficiently. These digital currencies improve payment system security while streamlining and automating processes. They also accelerate interbank and cross-border transfers.…
Filed under: News - @ April 16, 2025 5:27 am