Central bank digital currency (CBDC)
A central bank digital currency, or CBDC, is a digital form of money issued by a nation’s central bank. It is different from decentralized cryptocurrencies because it is issued and controlled by the nation’s public monetary authority. This contrasts with cryptocurrencies that have been created by a private issuer or blockchain community. A CBDC could be created to facilitate payments between individuals, businesses, banks, or government institutions. A CBDC is also different from a stablecoin, which is usually issued by a private company or protocol and attempts to track the value of another asset such as a national currency.
The Bank of Canada noted in a 2025 feasibility study that some CBDC system designs could offer faster and lower-cost alternatives for basic payments with high privacy.
Highlights
- A government-issued digital currency controlled by the central bank.
- Unlike cryptocurrencies, CBDCs are centralized and regulated.
- Aims to improve financial inclusion and streamline digital payments.
Frequently Asked Questions
How is a CBDC different from Bitcoin?
CBDCs are government-controlled digital currencies, whereas Bitcoin is decentralized and operates independently of central authorities.
Why are governments developing CBDCs?
CBDCs provide a more efficient and secure digital payment system while helping governments maintain control over monetary policy.