All you need to know: Central Bank Digital Currency

All you need to know about Central Bank Digital Currency


What is a Digital Currency?

Digital currency is a form of currency that can only be used digitally or electronically. It is also known as digital money, e-money, e-currency, or cyber cash. 

Digital currencies can be centralized or decentralized. The Fiat currency, which exists in physical form, has a centralized production and distribution system by central banks and government agencies. Well-known cryptocurrencies such as Bitcoin and Ethereum are examples of decentralized digital currency systems.


What is Central Bank Digital Currency?

Governments are now releasing digital versions of their currencies denoted by a common terminology as Central Bank Digital Currency (CBDC).

Central Bank Digital Currency (CBDC) is a regulated digital currency issued by the country’s central bank. The CBDC is a complement or alternative to traditional fiat currencies. Unlike fiat currencies, which exist in physical and digital forms, the CBDC exists in purely digital forms.

To understand CBDC with a simple example, consider a UPI transaction. While it only requires a UPI Id for the transaction, the underlying process involves multiple steps and requires an intermediary(banks) to transfer money. CBDC simplifies this process as the central bank assigns it, and no intermediary is needed.

Countries having CBDC

9 countries have rolled out CBDC, including the Bahamas, seven countries in the Caribbean islands and Nigeria. Surprisingly, all nine nations are small economies with low financial inclusion; in addition, banking services in these countries are underdeveloped and expensive, thus making CBDC a viable option.


Research stage (Included since it was mentioned in the structure of the article, but the UK has made no progress in CBDC)

In April 2021, the Bank of England announced an upcoming partnership with HM Treasury to launch a CBDC Taskforce to explore the viability of UK CBDC. Also announced in this statement were the creations of a CBDC Engagement Forum and CBDC Technology Forum to gather input and foster dialogue. In early June 2021, the Bank of England released a discussion paper pertaining to its current, tentative CBDC path. There is still no guarantee that the Bank of England will pursue a CBDC, but in a statement, it was clarified that “the Bank now intends to deepen its exploration of CBDC.”

Digital Yuan – Pilot Stage

In April 2020, China became the world’s first major economy to pilot a digital currency. As of February 2022, the pilot has been operational in 11 regions, including the Olympic venues in Beijing and Zhangjiakou. 

Digital Yuan, even in its pilot stage, according to October 2021 numbers, 123 million individual wallets and 9.2 million corporate wallets had been opened with a transaction volume of 142 million and transaction value of RMB 56 billion (equivalent to approximately $8.8 billion).

PBOC joined central banks from Thailand, the United Arab Emirates, and Hong Kong to explore a cross-border wholesale CBDC project named Multiple Central Bank Digital Currency (m-CBDC) Bridge. Some believe China can use this to counter or bypass SWIFT.

Digital Yuan will also be programmable. Suppose the government provides incentives to farmers for fertilizers; the programmable digital currency allotted to the farmers can only be utilized to purchase fertilizers. This can then be used to digitally track the government incentive program’s efficacy.


What is a Digital Rupee
All you need to know about Digital Rupee

What is Digital Rupee?

Among the significant personal finance announcements made by Finance Minister Nirmala Sitharaman in the 2022 budget speech,  the Reserve Bank of India (RBI) announced its digital Rupee in 2022-23. This digital Rupee is the central bank’s digital currency. FM also explained how the introduction of the Central Bank Digital Currency (CBDC) could give a significant boost to the digital economy.

It is to be noted that the digital Rupee is still in its development phase, and the underlying technology to be based on blockchain or something else isnt fixed as yet. Also, there has been no official timeline released yet.


We hope this articles gives you an insight about Central Bank Digital Currency. If you need any assistance on Investments, Insurance or How To Invest In Mutual Funds Feel free to contact Wealth Baba. We will try to help you out in the best possible way.

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