Central Bank Digital Currency
| A central bank digital currency (CBDC) is a digital form of fiat currency. A CBDC is a currency that is issued by a central bank and is backed by the full faith and credit of the government that issued it. A CBDC is different from a virtual currency, which is a digital representation of value that is not issued by a central bank and is not backed by a government. Bitcoin, Ethereum, and Litecoin are examples of virtual currencies. A CBDC is also different from a digital currency, which is an electronic form of fiat currency. A digital currency is a fiat currency that exists in a digital form. The U.S. dollar is an example of a digital currency. The People’s Bank of China (PBOC) is researching and testing a CBDC. The PBOC has been working on a prototype for a digital yuan for several years. In 2019, the PBOC announced that it was working on a CBDC, but it did not provide any details about the project. The PBOC’s governor, Yi Gang, said in 2020 that the central bank was making progress on the digital yuan and that it would be tested in “a small scale” in 2021. He also said that the digital yuan would not replace cash, but would complement it. The digital yuan is not the only CBDC in development. The Bank of Japan (BOJ) is also researching a CBDC. The BOJ’s governor, Haruhiko Kuroda, said in 2020 that the central bank was studying the feasibility of issuing a CBDC. The European Central Bank (ECB) is also considering issuing a CBDC. The ECB’s president, Christine Lagarde, said in 2019 that the central bank was exploring the possibility of issuing a CBDC. The Bank of England (BOE) is also researching a CBDC. The BOE’s governor, Mark Carney, said in 2018 that the central bank was looking into the possibility of issuing a CBDC. The Swiss National Bank (SNB) is also researching a CBDC. The SNB’s president, Thomas Jordan, said in 2019 that the central bank was studying the feasibility of issuing a CBDC. The central banks of Canada, Sweden, and the Bahamas are also researching CBDCs. The Bank for International Settlements (BIS) is an organization that represents central banks. The BIS released a report in 2019 that said that “most” central banks were researching CBDCs. The BIS also released a report in 2020 that said that “a number of” central banks were planning to issue CBDCs. The report did not name any specific central banks. The International Monetary Fund (IMF) is an organization that represents countries. The IMF’s managing director, Christine Lagarde, said in 2018 that the IMF was “closely monitoring” the development of CBDCs. The Organization for Economic Cooperation and Development (OECD) is an organization that represents developed countries. The OECD released a report in 2019 that said that CBDCs could have “significant implications” for the global economy. The report said that CBDCs could “change the way we use money” and that they could “have a profound impact on the financial system.” |
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