CBDC (Central Bank Digital Currency)
Quick Answer
A Central Bank Digital Currency is a digital form of a country official currency issued directly by the central bank.
Definition
A Central Bank Digital Currency is a digital form of a country official currency issued directly by the central bank.
Explanation
CBDCs are fundamentally different from cryptocurrencies like Bitcoin. While Bitcoin is decentralized and issued by no government, a CBDC is issued by a central bank and carries the same legal status as physical banknotes. One digital dollar or euro is worth exactly one unit of that currency with no price volatility.
There are two types of CBDC: retail CBDCs designed for everyday use by individuals and businesses, and wholesale CBDCs designed for interbank settlements between financial institutions. Most current CBDC projects are retail-focused, aiming to give citizens a direct digital payment option backed by the central bank.
As of 2026 over 130 countries are exploring or developing CBDCs. China has deployed the digital yuan in multiple cities. The European Central Bank is developing the Digital Euro. Several central banks in Asia, Africa, and the Americas have active pilot programs underway.
Example
A citizen receives 50 euros in digital form directly from the central bank via a wallet app spendable at any merchant.