In addition to determining how a digital currency might work in the U.S. are jointly conducting research into a CBDC through Project Hamilton. In the U.S., the Federal Reserve and M.I.T. While no national central bank has yet launched its own digital currency, at least 80% of central banks are currently researching this technology. Think of it like Bitcoin, but if Bitcoin were managed by the Federal Reserve and had the full backing of the U.S. What Is a Central Bank Digital Currency (CBDC)?Ī central bank digital currency (CBDC) is a digital currency that would be issued and overseen by a country’s central bank. Functionally, this may be no different than how you currently treat your money using payment apps like Venmo, Paypal or Apple Pay.įollowing the successful launch of decentralized cryptocurrencies like Bitcoin and Ethereum, which store value but are not managed by any central authorities, governments and central banks around the world are researching the possibility of creating their own digital currencies, commonly known as central bank digital currencies. It always remains on a computer network and is exchanged via digital means.įor example, instead of using physical dollar bills, you’d make purchases by transferring digital currency to retailers using your mobile device. Digital currency, however, never takes physical form. Right now, you could go to an ATM and turn an electronic record of your currency holdings into physical dollars. What differentiates digital currency from the electronic currency currently in most Americans’ bank accounts is that it never takes physical form. currency in circulation is only about one-tenth of the overall money supply the remainder is held in various bank deposits in electronic form. In the U.S., for instance, the physical U.S. Electronic versions of currency already predominate most countries’ financial systems. What Is Digital Currency?ĭigital currency is any currency that’s available exclusively in electronic form. The rise of Bitcoin, Ethereum and thousands of other cryptocurrencies that exist only in electronic form has led global central banks to research how national digital currencies might work. Digital currency has the potential to completely change how society thinks about money.
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