A Central Bank Digital Currency is a digital version of a country’s fiat currency issued and backed by its central bank. It functions as legal tender, providing a direct claim on the central bank rather than a commercial bank. These digital assets aim to modernize payment systems, offering stability and governmental oversight distinct from private cryptocurrencies. Implementations may involve retail access for the public or wholesale use for financial institutions.
Context
Central banks globally are actively researching and piloting Central Bank Digital Currencies to address challenges in payment systems and maintain financial stability. Discussions often revolve around the appropriate design models, balancing user privacy with regulatory requirements, and managing potential disruptions to existing financial structures. The future adoption rates and international interoperability standards are areas of intense focus.
The EU's digital euro roadmap signals a strategic shift to mitigate reliance on foreign payment systems, necessitating proactive assessment of its impact on existing financial infrastructures.
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