Revolution in the Payment System: Central Bank Digital Currency


CBDC – Central Bank Digital Currency

In recent years, the growing interest in digital currencies has drawn attention from banking institutions worldwide. In India, there are plans to introduce a Central Bank Digital Currency (CBDC), which would represent a revolutionary step in the field of payment systems. CBDC, stored in a digital wallet maintained by an intermediary bank, aims to streamline financial transactions and increase the government’s control over the circulation of money.

Categories of CBDC

There are two main categories of CBDC: wholesale and retail. Wholesale CBDC would be dedicated to financial institutions, while the retail version would be directly aimed at citizens. This differentiation allows tailoring the functions of the digital currency to specific target groups, ensuring a more effective payment system.

Advantages and Challenges of CBDC

Replacing cash with cryptocurrency or CBDC may help combat money laundering, even though it is worth noting that money laundering represents only a small percentage of all financial crimes. CBDC can also serve as a tool of state power, similar to traditional fiat money. However, research on the strategic benefits of geo-economic applications mainly focuses on the economy of traditional currencies, not fully anticipating the innovative potential of digital money.

Recommendations and Elements of an Effective CBDC System

Following the recommendations by the Bank for International Settlements (BIS), key elements in building an effective CBDC system include ensuring stability in issuance, the need for coexistence with traditional forms of money, and effective management of the payment system. An important aspect is also finding a balance between control over the circulation of digital money and maintaining transaction privacy and security.

The Role of CBDC in Transactions

CBDC, similar to decentralized cryptocurrencies, operates in transactions through operations recorded in a blockchain, where digital assets pass from hand to hand. This opens up new possibilities for fast and efficient transactions, with the potential to significantly impact international economic relations and the development of the financial sector.

Research and Evolution of the Financial System

Research on green finance, fintech adoption, digital awareness, and the transformation of the banking sector contribute to the ongoing evolution of the financial system. By analyzing CBDC initiatives from various geographical regions, it is possible to assess their potential and differences in approaches to digital currencies, allowing for a better understanding of the impact of innovation on the economic environment.

In conclusion, CBDC not only represents a potential alternative to traditional forms of payment but also an opportunity for a revolution in the functioning of the global financial system, opening up new perspectives for both nations and citizens.