Definition ∞ Institutional digital currency refers to a form of digital money specifically designed for use by financial institutions within a wholesale payments system. These currencies are typically distinct from retail central bank digital currencies and private stablecoins. They facilitate interbank settlements and other large-value transactions efficiently. Their design often prioritizes speed, security, and regulatory compliance for financial sector operations.
Context ∞ The discussion surrounding institutional digital currency centers on its capacity to modernize wholesale payments, potentially reducing operational costs and settlement risks. Central banks and financial bodies are actively researching and piloting these digital forms of value. A critical future development involves the widespread implementation of institutional digital currencies, which could redefine interbank settlement processes and global financial infrastructure.
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