Some common motivations are: promoting financial inclusion by providing easy and safer access to money for unbanked and underbanked populations introducing competition and resilience in the domestic payments market, which might need incentives to provide cheaper and better access to money increasing efficiency in payments and lowering transaction costs creating programmable money and improving transparency in money flows and providing for the seamless and easy flow of monetary and fiscal policy.
There are many reasons to explore digital currencies, and the motivation of different countries for issuing CBDCs depends on their economic situation. So why would a government get into digital currencies? But this is different from a central bank issuing a digital currency. Cryptocurrencies run on distributed-ledger technology, meaning that multiple devices all over the world, not one central hub, are constantly verifying the accuracy of the transaction. Another type of cryptocurrency are stablecoins, whose value is pegged to an asset or a fiat currency like the dollar. Bitcoin is the most well-known fully decentralized cryptocurrency. There are already thousands of digital currencies, commonly called cryptocurrencies.
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Instead of printing money, the central bank issues electronic coins or accounts backed by the full faith and credit of the government.īut don’t digital currencies already exist? A Central Bank Digital Currency (CBDC) is the digital form of a country’s fiat currency that is also a claim on the central bank.
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