CBDCs (Central Bank’s Digital Currency) have come a long way since the idea was first mooted a couple of decades ago. It was non-starter then, but over the years the idea
gathered momentum and the virtual currency is finally coming closer to being a reality!
Thanks to cryptocurrencies such as Bitcoin, Ether, Dogecoin, etc., that have forced global central banks to give a serious thought to introduction of CBDC.
Characteristics of CBDCs
CBDCs are digital tokens, like cryptocurrency, issued by a central bank and are high-security digital instrument; like paper banknotes. It is a means of payment, a unit of account, and a store of value.
They are pegged to the value of issuing country’s fiat currency, a form of legal tender that can be used to exchange goods and services.
Many countries are developing CBDCs, and some have even implemented them. India recently launched CBDC pilot, while The Bahamas, Antigua and Barbuda, St. Kitts and Nevis, Monserrat, Dominica, Saint Lucia, St. Vincent and the Grenadines, Grenada and Nigeria have moved into the next leg of CBDC.
Nigeria in an effort towards implementing a “cash-less Nigeria” policy and encourage the use of eNaira, Nigeria’s CBDC has curtailed the amount of cash individuals & businesses can withdraw.
Since many countries have initiated initial steps of transition to digital currencies, it’s important to understand their dynamics they mean for society.
Increasing adoption of cryptocurrency and blockchain technology have furthered interest in cashless societies and digital currencies.
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Laxmikant Khanvilkar
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