This new form of currency could transform the way we see money
By Ashley Lannquist
Central banks around the world are experimenting with so-called Central Bank Digital Currency (CBDC). But what is it and why does it matter?
CBDC is a digitized version of domestic currency where the central bank issues new money equivalent to – and redeemable for – its domestic currency, often removing the equivalent amount of currency from the money supply.
It could be issued using distributed ledger technology, where transactions would operate and settle on a peer-to-peer basis.
CBDC may be issued for general use (“retail” CBDC) for peer-to-peer payments and payments from consumers to merchants; or for use by commercial banks and clearing houses (“wholesale” CBDC) for more efficient interbank payments that occur outside traditional correspondent banking and other payment systems.