What are central bank digital currencies (CBDCs)?

Central bank digital currencies (CBDCs) are the digital form of a government-issued currency that isn’t pegged to a physical commodity. They are issued by central banks, whose role is to support financial services for a nation’s government and its commercial-banking system, set monetary policy, and issue currency.

What is a digital currency?

Digital currencies are part of that story, and central banks have started to take note. Central bank digital currencies (CBDCs) are the digital form of a government-issued currency that isn’t pegged to a physical commodity.

What is CBDC and how does it work?

It’s central bank digital money in the national unit (e.g., the US dollar) representing legal tender with the liability of the central bank, similar to physical currency in circulation. This makes CBDCs more secure and less volatile than other digital currencies.

What is central bank money?

"Central bank money" refers to money that is a liability of the central bank. In the United States, there are currently two types of central bank money: physical currency issued by the Federal Reserve and digital balances held by commercial banks at the Federal Reserve.