The easiest way to place a CBDC is to compare it with the two things it sits between. Physical cash is a direct claim on the central bank, but you can only hand it over in person. The balance in your bank app is a claim on a commercial bank, not the central bank, which is why deposit insurance exists. A CBDC aims to combine the two: central-bank money you can send electronically.
Designs vary enormously. A retail CBDC is intended for ordinary people and shops; a wholesale one is limited to banks settling with each other. Most proposals keep commercial banks in the middle, distributing wallets and handling identity checks rather than letting individuals hold accounts at the central bank. Open questions include whether balances are capped, whether offline payments work, and whether the money can be programmed to expire or to be spent only on certain things.
It is worth being clear about what a CBDC is not. It is not an investment and has no price chart, because a unit is simply a unit of the national currency. It is also not decentralised in any meaningful sense; a ledger run by a central bank has an owner, which is the opposite of what <a href="/glossary/decentralization/">decentralisation</a> describes. The privacy trade-off is real and worth stating plainly: a digital payment leaves a record, and how much of that record is visible to whom is a policy decision, not a technical accident. A CBDC also differs from a privately issued stablecoin, which depends on a <a href="/glossary/peg/">peg</a> and on the reserves of a company.
Key takeaways
- A CBDC is central-bank money in digital form, sitting between physical cash and a commercial bank deposit.
- Retail and wholesale designs solve different problems, and most published models keep banks as the customer-facing layer.
- Privacy, spending limits and programmability are policy choices, so the details of a specific design matter far more than the label.
CBDC — frequently asked questions
Is a CBDC a cryptocurrency?
Not in the usual sense. It may borrow some of the same plumbing, such as digital signatures or a distributed ledger, but the defining features of a public cryptocurrency are permissionless access and no single controlling party. A CBDC has a central issuer that can freeze, reverse or update balances by policy. Think of it as digital national money rather than a crypto asset.
How is a CBDC different from a stablecoin?
A stablecoin is issued by a private company and tries to hold its value by backing each unit with reserves or by algorithm. Its promise is only as good as that issuer and those reserves. A CBDC needs no peg at all, because it <em>is</em> the national currency rather than a claim on someone who holds it. The difference comes down to who stands behind the money.
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