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How Central Banks Think About Digital Currency
In the late 1600s, the introduction of bank notes changed the financial system forever. Fast forward to today, and another monumental change is expected to occur through central bank digital currencies (CBDC).
A CBDC adopts certain characteristics of everyday paper or coin currencies and cryptocurrency. It is expected to provide central banks and the monetary systems they govern a step towards modernizing.
But what exactly are CBDCs and how do they differ from money we use today?
The ABCs of CBDCs
To better understand a CBDC, it helps to first understand the taxonomy of money and its overlapping properties.
For example, the properties of cash are that it’s accessible, physical and digital, central bank issued, and token-based. Here’s how the taxonomy of money breaks down:
- Accessibility: The accessibility of money is a big factor in determining its place within the taxonomy of money. For instance, cash and general purpose CBDCs are considered widely accessible.
- Form: Is the money physical or digital? The form of money determines distribution and the (Read more...)