Digital currencies started bringing sweeping reforms to the financial market, with CBDCs also being a leading theme that got into the spotlight. While decentralized networks like cryptocurrencies Bitcoin and Ethereum are based, CBDCs are a central bank-issued and controlled digital currency that has government backing behind it.
The goal of CBDCs is aimed at reshaping the modern financial system to create a more effective payment system while enhancing the transmission of monetary policy. Several nations across the globe, such as China, U.S., and Eurozone member-states, currently experiment or test CBDCs in the hope of connecting traditional banking with the emerging digital economy.
CBDC operations aim at maximizing the benefits of digital payments while ensuring the stability and security that are associated with fiat currencies. They have the potential to transform payment systems, enhance financial inclusion, support government regulation of money circulation, and battle cash in a fast-evolving digital financial era.
Considering the influence of digitalization on the financial sector, information on CBDCs has become relevant to investors, traders, and financial institutions as well. The article will present an overview of CBDCs, their advantages, disadvantages, applications, and possible influence on the world economy.