The Rise of CBDCs: Governments Exploring Digital Versions of Fiat Currency
Central Bank Digital Currencies (CBDCs) are being researched and piloted by numerous countries, potentially offering benefits like payment efficiency and financial inclusion, but also raising privacy concerns.
Central Bank Digital Currencies (CBDCs) represent a digital form of a country's fiat currency, issued and backed by the nation's central bank. Unlike cryptocurrencies like Bitcoin, CBDCs would be centralized and regulated. Dozens of countries are actively exploring, researching, or piloting CBDCs, motivated by potential benefits such as improving payment system efficiency, reducing transaction costs, enhancing financial inclusion for unbanked populations, and countering the rise of private digital currencies. However, the development of CBDCs also brings forth significant questions and challenges regarding user privacy, cybersecurity, the impact on commercial banks, and the potential for increased government surveillance. The design choices made by central banks will be crucial in balancing these considerations.
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