What is a CBDC?

A digital currency created by a central bank that is loosely inspired by Bitcoin and other crypto assets

CBDC stands for central bank digital currency. Loosely inspired by Bitcoin and other crypto assets, a CBDC is a digital representation of a national currency. Numerous central banks around the world are working on CBDCs. As of June 2021, China is ahead in development, with the nation’s offering already in the pre-public launch tria phase. 

While the decentralized designs of Bitcoin and other cryptocurrencies free their users from financial censorship, there are fears that CBDCs will do the exact opposite. Rather than transacting on a public, open and permissionless blockchain, the most likely designs for CBDCs will be private and permissioned networks operated by central banks or national governments. 

Such systems will likely give authorities access to more information about a nation’s citizenry and spending habits than ever before. Indeed, it would even be possible to exclude an individual from transacting with others entirely by simply blacklisting their wallet address across the network. 

Despite clearly representing a threat to privacy, some crypto industry observers believe CBDCs will hasten the adoption of open, public blockchains. With CBDCs familiarizing citizens with purely digital currencies, it may be easier for the public to understand and value decentralized cryptocurrencies. Similarly, the process of exchanging a government-issued digital currency with an asset like BTC may be much more straightforward than it is with today’s fiat currencies.

Disclaimer
This content is provided for informational purposes only and may cover products that are not available in your region. It is not intended to provide (i) investment advice or an investment recommendation; (ii) an offer or solicitation to buy, sell, or hold crypto/digital assets, or (iii) financial, accounting, legal, or tax advice. Crypto/digital asset holdings, including stablecoins and NFTs, involve a high degree of risk and can fluctuate greatly. You should carefully consider whether trading or holding crypto/digital assets is suitable for you in light of your financial condition. Please consult your legal/tax/investment professional for questions about your specific circumstances. Information (including market data and statistical information, if any) appearing in this post is for general information purposes only. Some content may be generated or assisted by artificial intelligence (AI) tools. While all reasonable care has been taken in preparing this data and graphs, no responsibility or liability is accepted for any errors of fact or omission expressed herein. OKX Web3 Wallet and its ancillary services are not offered by OKX Exchange and are subject to the OKX Web3 Ecosystem Terms of Service.

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