The Banking Executive Magazine - July Issue 2021

INTRODUCTION Central Bank Digital Currency CBDC may be the right cryptocurrency of the future. We hereby shed light on various aspects of CBDC including key features and uses, historical evo- lution and regulation, technology de- sign and infrastructure, challenges and opportunities, and world spread. We conclude with a future outlook and the way forward. CBDC KEY FEATURES Central Bank Digital Currency CBDC is a digital currency issued by a cen- tral bank. It is a new form of central bank money. Central Bank Digital Currencies are also called digital fiat currencies or digital base money. CBDC is inspired by bitcoin, but is different in various respects. While Bitcoin is not issued by a state and lack the legal tender status declared by the government, CBDC is issued and backed by a central bank in a country. More than 80% of central banks around the world have interest to issue their CBDC. Key features and uses of CBDC are: • Digital banknote: a CBDC is like a digital banknote. It could be used by individuals to pay businesses and shops. It can also be used be- tween financial institutions to settle trades in financial markets. • A third form of central bank money: Central bank money tradi- tionally takes two forms. These are cash and reserves held by eligible financial institutions at the central bank. CBDC is a third version of currency that uses an electronic record or digital token to represent the digital form of a nation's cur- rency. CBDC is issued and man- aged directly by the central bank and can be used for a variety of CENTRAL BANK DIGITAL CURRENCY: IS IT THE RIGHT CRYPTOCURRENCY? the BANKING EXECUTIVE 38 ISSUE 151 JULY 2021 BY DR SOHA MAAD