Central Banks Digital Currency

Central Bank-Issued Digital Currency (CBDC) Defined

The Bank of England defines a Central Bank digital currency as “an electronic fiat liability of a Central Bank that can be used to settle payments or as a store of value. It is, in essence, electronic Central Bank money or ‘narrow’ money.” It is important to note that a CBDC will not replace electronic money, physical notes and coins, nor traditional banking. CBDC complements these existing payment mechanisms, and addresses a number of the shortcomings and costs of physical cash and electronic money, as well as financial exclusion and the high cost of banking. CBDC versus cash is analogous to the manner in which email complements traditional postal methods and has improved the efficiency of conducting business.

Problems with Cash:

The recurring cost of printing and issuing physical currency.

• The cost of security and risks of theft in transportation and storage.

• Limitations during transactions, where both parties must be present.

• Considerable time and resources are required to count physical cash.

• Circulation of counterfeit currency poses a continuous risk.

• Physically damaged currency requires removal from circulation.

Cash usage imposes a regressive tax.