In this McKinsey Explainer, we look at what a CBDC (central bank digital currency) is and how this new technology is reshaping the global financial system.
What is CBDC? A central bank digital currency, or CBDC, isn’t too different from a traditional currency issued by a central bank. One can define CBDC as a digital version of fiat currency, bringing with it the conveniences of digital assets. This digital currency...
As much as CBDCs have some positive sides, there have been serious concerns surrounding them. For example, some experts have argued that it could become an instrument of control as is the case with the proposed Brazilian CBDC. While they are also built on blockchain technology, crypto supporter...
What is a central bank digital currency? A central bank digital currency (CBDC) is a digital version of a country's central bank money or fiat currency.Fiat moneyis not tied to a physical commodity such as gold or silver. The role of a central bank is to support financial services, set...
By contrast, CBDC would be central bank money (i.e. fiat money) created directly by the government's central bank, like the paper notes and coins in circulation. In other words, CBDCs aren't a form of credit. Nor are they a privately minted cryptocurrency that is merely denominated in ...
Are CBDCs the same as digital funds? Similarities have been drawn between digital funds in a bank account and CBDCs because they can work similarly. The difference is that a CBDC is a direct liability of the central bank, much like actual cash, whereas digital funds in bank accounts are a...
Hedder: How might the introduction of CBDCs impact the role of the dollar as the world's primary reserve currency? Andolfatto: My own view is that it's not likely to impact the role of the US dollar as a global reserve currency, if any foreign entity implements a CBDC. Things like tr...
Is a CBDC Based on a Blockchain? A CBDC can be based on a blockchain, but it doesn't need to be. The Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT)'s Digital Currency Initiative found in their research that distributed ledgers could hinder the efficiency...
A central bank digital currency (CBDC) is a form of digital currency issued by a country's central bank. It is similar to cryptocurrencies, except that its value is fixed by the central bank and is equivalent to the country's fiat currency. Many countries are developing CBDCs, and some ha...
In addition, Euroclear has been working since 2021 on a central bank digital currency (CBDC) with the Banque de France while working out how to bring to the market blockchain-based settlements for government bonds.1610In March 2024, Euroclear also bought a major stake in IZNES, a regulated ...