Central bank digital currency

A central bank digital currency (CBDC) is digital money issued as a liability of a central bank. It can be designed for public use or restricted to financial institutions.

Central bank money: Money that is a direct liability of a central bank, including banknotes and reserve balances. A CBDC is a digital form of this underlying monetary liability.
Retail central bank digital currency: A CBDC intended for use by households and businesses in everyday payments. Retail designs make central-bank money digitally available beyond financial institutions.
Cash: Physical notes and coins used as a means of payment and issued by a monetary authority. CBDCs could extend central-bank money into digital payments while cash remains physical and usable offline.
Cross-border payment: A payment in which the payer and recipient are located in different countries or monetary jurisdictions. CBDC links between jurisdictions could alter the cost and speed of international transfers.
Bank disintermediation: The movement of financial activity away from banks toward other institutions or direct forms of finance. People shifting deposits into CBDCs could reduce banks’ deposit funding.
Fiat money: Money whose value is not fixed to a commodity and is supported by monetary institutions and public trust. CBDCs are fiat money issued in digital form, not a new commodity-backed currency.
Wholesale central bank digital currency: A CBDC restricted to financial institutions for settlement and other wholesale transactions. Wholesale designs focus on interbank and market settlement rather than public payments.
Stablecoin: A digital asset designed to maintain a stable value, commonly by reference to a currency or reserve assets. Stablecoins are privately issued, whereas a CBDC is a central-bank liability.
Financial inclusion: The ability of people and businesses to access and use suitable financial services. A well-designed retail CBDC could widen access, while requiring devices and connectivity may exclude some users.
Bank run: A rapid withdrawal of deposits driven by fears that a bank cannot meet its obligations. Fast conversion into central-bank money could intensify deposit flight during financial stress.

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