CBDC (CBDC)
A CBDC, or central bank digital currency, is digital money issued by a central bank and held as a claim on that central bank. It is not a privately issued stablecoin, and it is not the commercial bank money already moving through payment systems.
Also called: central bank digital currency
Two broad designs are under discussion. A retail CBDC would be held by the public, usually through banks or licensed distributors that handle onboarding and wallets while the money itself stays a claim on the central bank. A wholesale CBDC would be restricted to banks and other institutions and used to settle large-value and cross-border obligations on a shared ledger rather than through the existing chain of accounts.
Most CBDC work is research, pilot or limited deployment, and the design questions that decide its commercial usefulness are unsettled: whether holdings are capped, whether transfers are traceable and by whom, what intermediaries can see, whether balances pay interest, and whether a foreign business can hold the currency at all. Those answers, not the technology, determine what a CBDC would be good for.
The point for a business is that a CBDC is a different kind of money from both a stablecoin and the balance in an ordinary bank account. Real-time payments systems already move commercial bank money in seconds; a CBDC would change what the money is, not only how fast it travels.
In practice
A CBDC is a liability of the central bank. A privately issued stablecoin is a liability of its issuer. That is a fundamentally different credit position, and it is the distinction that disappears when someone calls both of them “digital currency” in the same sentence.
Example
A treasurer holding one million units of a retail CBDC holds a claim on a central bank. The same treasurer holding one million units of a fiat-backed stablecoin holds a claim on a company, payable out of the reserves it keeps and on the redemption terms it publishes. The two balances may be quoted at the same price. The exposure behind them is not the same.
Commonly confused with
| Term | How it differs |
|---|---|
| Stablecoin | A stablecoin is issued privately and is a claim on its issuer; a CBDC is issued by the central bank and is a claim on the central bank. |
| Real-Time Payments | Real-time payments move existing commercial bank money faster; a CBDC introduces a new form of money rather than a faster way to move the old one. |
See also
- StablecoinA stablecoin is a crypto-asset designed to hold a steady value against a reference, almost always a fiat currency such as the US dollar. How that steadiness is supported differs sharply from one issuer to the next, and so does what a holder can actually redeem.
- Real-Time PaymentsReal-time payments are bank transfers that clear and settle within seconds, at any hour, and are irrevocable once the receiving bank accepts them. RTP is also the proper name of one of the two US instant networks, which is a common source of confusion.
- TokenizationTokenization means representing an asset, or a claim on one, as a transferable token recorded on a ledger. The token is a record of entitlement; whether legal ownership of the underlying asset moves with it depends on the contract and the governing law, not on the ledger.
- SettlementSettlement is the point at which value actually moves between parties and the obligation between them is discharged. It is a separate step from clearing, which only works out who owes what, and from finality, which is the moment the transfer can no longer be reversed.