Central Bank Digital Currencies

Abstract

Central bank digital currencies (CBDCs) represent a transformative development in the realm of digital finance, offering a government-backed digital alternative to traditional fiat currencies. This chapter delves into the concept, benefits, impacts, and challenges associated with CBDCs. Positioned as government-backed digital alternatives to traditional fiat currencies, CBDCs address the surge in digital payments and private digital currencies. They offer secure digital payment solutions, ease online and offline transactions, and foster financial inclusion, especially in underbanked regions. While CBDCs promise transformation, concerns arise regarding increased financial surveillance, privacy implications, and the intricate integration into existing payment systems. Furthermore, potential ramifications on the banking sector, such as heightened competition and reduced credit availability, are examined. This study emphasizes the need for a balanced approach, ensuring that implementing CBDCs maximizes benefits while mitigating associated risks.