Central Bank Digital Currencies (CBDCs) represent a digital form of a nation’s currency issued and regulated by its central bank. Unlike cryptocurrencies such as Bitcoin or Ethereum, which are decentralized and operate independently of governments, CBDCs are entirely centralized. They aim to modernize financial systems, improve transaction efficiency, and offer a stable digital payment solution backed by the full faith and credit of the issuing government. What is a CBDC? A CBDC is a digital version of a country’s fiat currency. It serves the same purpose as physical cash and bank deposits but exists purely in electronic form. The central bank is the sole authority responsible for its issuance, management, and regulation. CBDCs typically operate on distributed ledger technology (DLT), though not necessarily in the decentralized manner of cryptocurrencies. The technology ensures secure, transparent, and efficient processing of transactions. These digital currencies can be used for everyday payments, just like cash, but with enhanced speed and traceability. Key Features of CBDCs Centralized Control: The central bank oversees the creation and distribution of the currency, ensuring it aligns with national monetary policies. Legal Tender: CBDCs hold