Central bank digital currency: What is it and why now?

Abstract

A central bank digital currency ( CBDC) is electronic in nature and one which amounts to the currency of the country implementing it. The value of a CBDC is the same as the physical form, i.e. a £10 CBDC would equate to a £10 bank note. It is not classed as a cryptocurrency, which is a form of digital currency, however, the Bank of England has said that it may use the distributed ledger technology ( DLT) which is utilised for cryptocurrency. Central banks are researching into the benefits and implications of a CBDC, such as making payments more resilient and faster, and adapting to the digital economy. Cynically, it appears that central banks are concerned by the potential of cryptocurrencies becoming mainstream and making central banks redundant. This article will explore the following: what is a CBDC, why is it being explored now and the future of money and payment services.