Never mind security tokens, the newly licensed SIX Digital Exchange is in discussions with NFT funds and central banks. SDX’s chairman discusses the trading venue’s uniquely Swiss ambitions. Read all about it! Did this blog spike your interest? Let’s talk about it : [email protected]
CBDCs - what are they?
Central Bank Digital Currency (CBDC), also known as digital fiat currencies, is a form of digital money issued by government central banks for public and business use. CBDCs are not meant to replace cash but to co-exist as an additional payment method and should be distinguished from digital forms of money issued by private entities.
What makes CBDC different from traditional currencies is that it can use new payment technology, typically blockchain, to potentially make transactions more efficient and cheaper.
This new type of currency is still in its early stages of use. Most countries are just beginning to explore the concept, such as the U.S. form of the digital dollar. However, several dominant countries, including China and South Korea, have already completed research and tested the technology.
Advantages and disadvantages of CBDCs
Central bank digital currencies (CBDCs) can significantly change financial services by facilitating the availability and the use of fiat currency. The main benefits of introducing CBDCs are:
- Enabling real-time monitoring and analysis of all funds passing through the central bank;
- Increasing the efficiency of central bank systems;
- Enabling faster and easier transactions through mobile applications;
- Reduce the cost of financial services by reducing the printing of banknotes and eliminating the physical distribution and destruction of cash from circulation.
On the other hand, disadvantages include the fact that CBDCs face some challenges related to the economic situation in a country, as well as other factors such as widespread usage, security (exposure to cyber-attacks) or cross-border payments.