What Is a Central Bank Digital Currency, or CBDC?

What Is a Central Bank Digital Currency, or CBDC?


At my Crypto Writing School, my students always get confused when we discuss central bank digital currencies, or CBDCs, because we've just completed an introductory lesson on Bitcoin (BTC) and various other crypto assets like Ethereum (ETH). These assets can be called cryptographic assets or "cryptocurrencies" because they're truly decentralized. 

When teaching my pupils about peer to peer currencies, they automatically try to draw similarities between cryptos and CBDCs, when there are almost no similarities EXCEPT that both CBDCs and cryptocurrencies exist purely in a digital form. CBDCs are different from digital fiat currency because fiat money also exists in a physical form.

Big banks in Europe, the Middle East, Australia, South and North America, literally everywhere are looking into the feasibility of introducing a digital currency managed by a country's central or reserve bank. A central bank is responsible for making a country's monetary policy and plays a crucial role in support every nation's economy. 

Meanwhile, stablecoins you might ask are NOT like CBDCs. That's because a company like Paxos is a private firm and it's definitely not a central bank. Stablecoins are a whole different topic  but many of the people i teach confuse them with CBDCs. All you need to know about stablecoins is they aim to be pegged one-to-one with real world assets, mostly national currencies like the British pound and the US dollar. 

Now let's get back to CBDCs, which are being proposed because they could potentially reduce all the paper printing and additional labor costs of managing physical fiat notes. There are many reasons why central banks may consider issuing their own digital currencies. We shall visit this important topic in Part 2 and other future series on CBDCs here at my free version of the Crypto Writing School.


Omar Faridi
Omar Faridi

I enjoy writing about all topics related to Bitcoin, Blockchain, and other cryptocurrencies. The topics that interest me most are crypto regulations, quantum resistant blockchains, Ethereum and Bitcoin Core development.


Crypto and Blockchain Education
Crypto and Blockchain Education

After publishing around 2,500 articles on Fintech, cryptocurrencies and distributed ledger technology, and having taught students of all age groups from elementary to Phd level, I bring to you my best global initiative ever: The Crypto Writing School, which helps people from all over the world learn about Bitcoin (BTC), Altcoins, and Blockchain technology. Expect more informative blogs posts and educational materials from consistently.

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