Definition ∞ Bank-Issued Digital Currency is a digital representation of fiat money issued and backed by a commercial banking institution. This form of digital money typically operates on a distributed ledger technology or similar electronic system controlled by the issuing bank. It differs from central bank digital currencies by being a liability of a commercial bank rather than the central bank. Such currencies aim to offer the efficiency of digital transactions within a regulated financial framework.
Context ∞ A key discussion point for bank-issued digital currency involves its potential to modernize payment systems while maintaining financial stability and regulatory oversight. Its distinction from stablecoins, which are often issued by private entities and may carry different risk profiles, is also a critical area of focus. Future developments will likely see further exploration of these instruments in interbank settlements and wholesale transactions, potentially complementing existing real-time gross settlement systems.
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