Basically, there are two types of CBDCs, wholesale and retail. Wholesale CBDCs are primarily used by financial institutions.
Retail CBDCs are used by consumers and businesses, much like physical forms of currency.
Under wholesale CBDCs, an institution can open an account with the central bank and deposit funds or use to settle interbank transfers.
Retail CBDCs are government-backed digital currencies used by consumers and businesses. It would eliminate intermediary risk—the risk that private digital currency issuers might become bankrupt and lose customers’ assets.
There are two types of retail CBDCs: Token-based retail CBDCs are accessible with private/public keys while account-based retail CBDCs require digital identification to access an account.
Benefits of CBDC
CBDCS are perceived as an effective tool to energize economy. The many positive implications of CBDCs will reflect in financial inclusion, economic growth, technology innovation and increased transaction efficiencies, besides technological advancement, and risk mitigation.
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Laxmikant Khanvilkar
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