Central Bank Digital Currency (CBDC) is a new form of money that exists only in digital form. Instead of printing money, a central bank issues widely accessible digital coins so that digital transactions and transfers become simple.
Efforts towards the CBDC are increasing all over the world for many reasons. The COVID-19 crisis induced a shift in payment habits towards digital, contactless payments and e-commerce due to a now refuted danger of banknotes being way of transmitting infection, which accelerated the decline of cash use. Secondly, cryptocurrencies developed by private organisations or informal communities (e.g., Bitcoin) have seen significant developments and value gain. As a response, 87 countries(representing over 90 percent of global GDP) are now exploring central bank digital currencies, while 9 of them have fully launched a state-owned digital currency.
The growing adoption of digital assets underpinned by blockchain technologies is accelerating the pace of innovation in the financial sector and capital markets. Blockchain technologies offer new paradigms when it comes to the decentralization of trust, and the case for Central Bank Digital Currencies (CBDC) lies in the promise of:
*Improved efficiency (reduced complexity, risks, settlement time)
*Distribution of ledgers as a different paradigm for the resilience of the system
*Openness driving competitiveness, hence lower costs and financial inclusion
*Better control and more prompt transmission of monetary policies, with built-in programmability.
