In the United States, over the course of several years, policymakers have studied, debated, and issued multiple reports on whether the Federal Reserve Bank should create a central bank digital currency—a “digital dollar” without reaching a definitive course of action.
CBDCs are digital versions of traditional paper fiat currencies backed by governments and issued to promote economic inclusion and broader access to financial services with tokenized payment efficiency. CBCDs improve monetary policy in global payment systems in lieu of the increase in tokenized electronic payments and the decline in the use of cash by providing accountability and stability. They mitigate the risk of financial instability arising from the creation of unregulated private electronic payment instruments, such as meme/altcoins, tokenized assets or stablecoins, and corruption.
There are two types of CBDCs. A retail CBDC is used by the general public, and a wholesale CBDC is exclusively designed for interbank payments and securities transactions.
