Central bank digital currencies are a digital representation of a country’s fiat currency. They are effectively a government-issued cryptocurrency designed to replace the traditional, physical form of fiat currencies.
The term CBDC is broad because its implementation involves several critical decisions on the part of an issuing central bank. The primary decision is whether a CBDC should be a general-purpose in that it’s available to be used by the general population. If not, then the issuing authority may decide to make it available for “wholesale” transactions, which means the CBDC is only used for settlements between banks. Finally, a CBDC could also only be used among central banks.
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