What Is A CBDC?

Central bank digital currencies are digital forms of a nation’s fiat currency, issued and regulated by its central bank, and emerged partly in response to stablecoins such as Facebook’s abandoned Diem/Libra project. Central banks presented them as a way to make payments and remittances more efficient. The article sets out their main features, including centralised issuance, legal tender status, programmability and traceability.

It argues that a CBDC cannot replace cash, because a central bank or payment provider could always block a transaction, and warns that programmability could allow restrictions on spending or even negative interest rates. The article also raises concerns about privacy, security and a single point of failure, notes that KYC requirements could exclude vulnerable people, and says citizens in countries that had trialled CBDCs had almost uniformly rejected them.