What is CBDC? Categories of CBDC. Differences of CBDC from bitcoin, ether and other cryptocurrencies. Who is already developing CBDC

In the twentieth century, the world's largest economies abandoned the idea of a gold standard, so the value of money became, in fact, virtual.

What is CBDC?

Central Bank Digital Currency (CBDC) is a virtual national money. The very idea of creating such currencies came to the authorities of the world after the success of cryptocurrencies, which also exist only in digital form.

Unlike bitcoin, ether and the like, CBDCs inherently cannot be decentralized. They would be regulated by a central bank. But at the same time, the transition to digital currency promises quite a few positive changes that can have a positive impact on the economy.

For example, the introduction of CBDC will help banks reduce the cost of transfers (including cross-border). In addition, it may become easier for financial institutions to compete with actively developing cryptocurrency companies in the future.

For central banks, one of the main benefits of CBDC is that it will be easier for them to regulate monetary policy. Moving to digital finance will allow them to monitor the economy more accurately and respond to changes in real time. As a result, from a central bank's perspective, there is increased stability, security, and control within the system.

Categories of CBDCs

CBDCs are divided into two main categories by architecture: wholesale and retail.

Wholesale (aka direct and commercial) refers to digital currencies that are designed for professional market participants - such as organizations that keep money in accounts at a centro-bank.

The transition to wholesale CBDC will eventually simplify cross-border payments and transfers between banks. With its help, central banks will be able to conduct any monetary policy and track all transactions with currency.

Wholesale CBDCs are created exclusively for professional market participants - they are suitable for interbank transactions, international trade transactions or clearing. Using a wholesale CBDC to pay in stores is not possible.

This is the purpose of retail CBDCs, which are intended for a wide range of people. In fact, they are a substitute for traditional money. And it is retail CBDCs that are most often in the news.

Most existing projects suggest that the value of digital currency should be pegged to the price of fiat currency - for example, the exchange rate of the digital yuan is not different from the paper one. Retail CBDCs themselves serve either as a supplement to traditional money or as a replacement for it.

Differences of CBDC from bitcoin, ether, and other cryptocurrencies

As mentioned above, CBDCs primarily differ from cryptocurrencies in their centralization. In essence, they are digital currencies "tamed" by the state. They are created using similar technologies, such as a distributed registry.

However, CBDC's distributed ledger works in a slightly different way. Typically, cryptocurrencies use blockchain, a variation of the distributed ledger. However, the government is not ready to give all participants in the network the right to conduct transactions directly. Therefore, only certain financial institutions will have access to the registry.

In other words, states want to retain control over certain aspects of the digital currency - for example, who controls it. Because it is hard to imagine that the authorities will decide to issue a strictly defined number of virtual coins and refuse to issue more in the future. But in the case of bitcoin and other cryptocurrencies it is quite possible.

The very idea of a state digital currency based on bitcoin developments would probably seem very ironic to the creator of the first cryptocurrency Satoshi Nakamoto. After all, in his description of the bitcoin concept, the author proposed it as an alternative to the existing regulated financial system, which then faced its biggest financial crisis.

Who has already begun to develop CBDC

The list of countries that have shown interest in creating their own digital currency is quite extensive. We have selected the most interesting projects:


Several of the world's largest economies are interested in creating a national digital currency, but China holds the palm. The country began actively developing CBDC back in 2019, but the COVID-19 pandemic has significantly accelerated the process. In 2020, experiments on the implementation of the digital yuan were conducted in several cities in China.

As early as January 2021, the Agricultural Bank of China (ABC) tested the e-CNY to fiat money exchange functionality at conventional ATMs in Shenzhen. In the spring, six of the largest financial institutions - Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, Postal Savings Bank of China and Industrial and Commercial Bank of China - experimented with digital yuan wallets.

And in mid-June, the pilot program for exchanging e-CNY into the regular yuan was significantly expanded - ATMs with such functionality appeared in Beijing. In addition, the Chinese authorities regularly draw large amounts of money in the form of digital yuan.
As of the end of October, 140 million people had e-CNY wallets. A total of 62 billion yuan ($9.7 billion) worth of transactions were made with the national digital currency.


Slightly less active CBDC develops another major Asian economy - Japan. Back in the summer of 2020, the country's central bank announced that it would consider the prospects of implementing the national digital currency, and in March 2021, the regulator announced the creation of a committee on CBDC. The latter, in particular, will discuss the prospects of creating a digital currency with businesses and authorities. The first phase of the experiment to implement CBDC in the country began in April.

However, the pilot program risks to drag on. In early July, a member of Japan's ruling Liberal Democratic Party, Hideki Murai, who oversees the CBDC project, commented on the timing. He said the authorities will have an idea of what the digital currency will look like by about the end of 2022.

Outside Asia, the development of their own CBDCs among major economies is not as active. At the same time, many central banks, according to a report by the International Monetary Fund (IMF), are exploring digital currencies. According to a survey conducted by the Bank for International Settlements, central banks of countries representing 20% of the world's population intend to introduce their projects in the next three years.

The Bahamas

According to a report by consulting firm PricewaterhouseCoopers (PwC), the Bahamas has overtaken China in the development of a national digital currency.

In the fall of 2020, the country's central bank launched a CBDC called the Sand Dollar (so the flat sea urchin is called for its resemblance to a coin). The value of the digital currency is pegged to the Bahamian dollar, the exchange rate of which depends on the U.S. dollar. CBDC became available immediately to all residents of the country, and you only need a cell phone to create a wallet.


Sweden is considered to be one of the pioneers in the creation of CBDC - the country which was the first in the world to reject the use of cash. From 2010 to 2020, the number of Swedish residents who pay by cash dropped from 39% to 9%.

At the same time, the country's authorities have begun to explore the prospects of introducing a CBDC called the digital krona (or e-krona). Until the spring of 2021, the project was tested virtually - without any real people or organizations. But in May the Central Bank of Sweden signed an agreement with the country's largest bank Handelsbanken to conduct a pilot program.


One country that is actively exploring the possibility of creating its own digital currency is Ukraine. In 2018, the National Bank of Ukraine (NBU) conducted a pilot project to create a digital hryvnia (or e-currency). In early July 2021, the NBU published the results of the study and a survey of market participants. Now the regulator has presented three options for the use of e-hryvnia in the future: for retail payments, for transactions with virtual assets and for cross-border transfers.


The European Central Bank (ECB) until recently has not announced any plans to develop its own CBDC. The Eurozone regulator was only involved in Project Stella, a joint project with the Bank of Japan for a wholesale digital currency.

That all changed in October 2020. At that time, the ECB issued a report on the possibility of creating a digital euro. The digital currency is supposed to be a full-fledged replacement for fiat money. In mid-July 2021, the ECB announced the beginning of a phase of studying the possibility of creating a CBDC. It is planned to last two years.


For the first time about the digital ruble (or "crypto-rouble", as it was then called in the media) in Russia began to talk in 2017. At that time, the Ministry of Communications prepared a draft decree of the government to study the possibility of creating a CBDC.

Despite this, the project itself is still in its early stages - in 2020, the Central Bank issued a report on the creation of the digital ruble. The document of the regulator, in particular, states that the e-ruble should be converted into fiat currency at a rate of 1:1. According to the plans of the Central Bank, it will be possible to pay for purchases both online and offline.

In April 2021, the Central Bank issued a report on the development of the CBDC. It indicated that the e-ruble will work as follows: the regulator will create wallets for digital currency for banks, and they will open accounts for customers. Testing of the digital ruble is scheduled for 2022.

CBDC: Forecasts for 2022

Many states believe that digital currencies of central banks are the future. Especially the process of digitizing payments, according to Benoît Kéré, head of the Bank for International Settlements, was accelerated by the COVID-19 pandemic and World War III.

"A well-designed CBDC would be a secure and neutral means of payment and settlement, acting as a common platform around which a new payment ecosystem could be organized. It will create an integrated open financial architecture that welcomes competition and innovation," - Kere said.

According to the Head of BIS, the central banks of the world should already start working on the creation of their own CBDCs. The fact is that it will take at least several years to implement a currency, while cryptocurrencies and stabelcoins - competitors of CBDC from Kere's point of view - already exist now.

Why shouldn't we be afraid of finance going digital?

"When will the development of financial technology punch a hole in this wall of superstition of our Central Bank? When will we get a real financial instrument that ensures independence in foreign trade settlements, apart from the statements and press releases about the "development of the digital ruble"?" - Russian billionaire Oleg Deripaska, commenting on the news of El Salvador's adoption of bitcoin as an official payment instrument.

The Latin American state, which the entrepreneur called "beggarly" in the post, does not appear to have found the strength to develop its own digital currency. This could be due to the fact that the country has no money of its own, and all its payments are made in U.S. dollars. So recognizing bitcoin was the easiest way to introduce digital finance into the economy.

Other countries (and even the European Union) are seriously thinking about creating virtual versions of their own currencies. Many say that in the long term this project could revolutionize the world of finance, but for the average citizen, nothing will likely change.

In the XX century, the world's largest economies abandoned the idea of a gold standard, so the value of money became, in fact, virtual. At the same time a system of non-cash payments began to develop at full speed, which eventually led to the fact that in the form of banknotes and coins there is only about 10% of all U.S. dollars.

Basically, the money in your account, to which the card is linked, is just information about how much money is available to you. And if suddenly all the people in the world run to the banks at the same time to cash out all the money from their accounts, the financial system would collapse. So switching to digital national currencies is a logical next step.
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