What do we call currency issued by a central bank in electronic form?
Question: What do we call currency issued by a central bank in electronic form?
One of the most important innovations in the field of finance is the emergence of digital currencies. These are not the same as cryptocurrencies, which are decentralized and operate without a central authority. Digital currencies, on the other hand, are issued by a central bank in electronic form and backed by the government's legal tender status.
What do we call these digital currencies issued by a central bank? The term that is widely used is central bank digital currency (CBDC). A CBDC is a digital representation of the national currency that can be used for payments, savings and other financial transactions. A CBDC can have many benefits, such as reducing transaction costs, enhancing financial inclusion, improving monetary policy effectiveness and strengthening financial stability.
However, a CBDC also poses many challenges and risks, such as disrupting the banking system, facilitating illicit activities, undermining privacy and exposing the economy to cyberattacks. Therefore, central banks need to carefully weigh the pros and cons of issuing a CBDC and design it in a way that maximizes its potential and minimizes its drawbacks.
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