CBCD

Simple question what is CBDC? First CBDC stands for Central Bank Digital Currency. It refers to a digital form of fiat currency issued by a country’s central bank. To define an easy answer CBDCs are designed to be a digital representation of a nation’s official currency. When we hear about digital currency the first and foremost thought is Bitcoin, however, CBDCs are typically centralized and tied to the existing financial system. There are 3 common models to implement CBDCs: 1. Retail CBDC: This model enables the general public and businesses to hold and transact in the digital currency issued by the central bank, typically through digital wallets or mobile apps. 2. Wholesale CBDS: This model is designed for financial institutions and facilitates interbank transactions and settlement in a central bank-controlled digital currency. 3. Hybrid CBDC: This model combines elements of both which are explained above, providing access to both individuals and financial institutions. There are different motivations behind CBDCs for each country, but some common reasons include enhancing financial inclusion, improving the payment system’s efficiency and security, reducing costs, countering the rise of private cryptocurrencies, and the most important reason which I believe is maintaining control over the monetary system. Pioneer countries that have started developing CBDC projects, are China, Sweden, Canada, the Bahamas, and many more. Pros and cons of CBDC: Pros are obvious first is Financial Inclusion, with digital wallets or mobile apps, individuals who lack traditional banking services can participate in the digital economy. Second Efficiency and Cost reduction will enhance the efficiency of payment systems, reducing transaction costs and settlement times. Safety and Security are the third pros and the number 4 which is the main reason it’s better for governments is Monetary Policy and Control. Cons of this system are: 1. Financial Stability and Disintermediation 2. Privacy Concerns 3. Technological Challenges and Security Risks 4. Centralization and Control With CBDC people all around the world would face more control over them and less freedom. Imagine you are walking a street and you should not be there the easiest way to control the person is to withdraw his/her money which has been implemented in China. What is your thought about this project?