Definition ∞ Digital bank money is a digital representation of funds held in commercial bank accounts. This form of money exists as entries in bank ledgers and is transferred electronically through existing payment systems. It differs from central bank digital currencies (CBDCs) as it represents a liability of commercial banks, not the central bank. It is the predominant form of money used for electronic transactions in most modern economies.
Context ∞ The rise of central bank digital currency (CBDC) initiatives has spurred renewed discussion around the nature and future role of digital bank money. Policymakers are examining how CBDCs might coexist with or impact the current commercial banking system and its digital offerings. The ongoing discourse involves exploring potential hybrid models where commercial banks play a role in distributing a central bank’s digital currency.
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