Explained | How Central Bank Digital Currencies could impact banking

cnbctv18.com:

Imagine a new type of money that has blockchain technology at its core but still has several features of a fiat currency. That’s precisely what a CBDC is.

Short for Central Bank Digital Currency, CBDCs are digital forms of fiat money being developed by governments on centralised blockchains. They are expected to offer the features and benefits of a crypto token but will complement the country’s fiat currency, making them less volatile.Blockchain technology and decentralised finance (DeFi) have shot to popularity in the last few months.

Currently, there are reportedly around 6,000 cryptocurrencies in circulation, and 10 percent of the world’s population has invested in them. Thanks to their unique features and growing market share, digital currencies have garnered the attention of major central banks.

Several regulatory bodies and policymakers are hard at work, trying to develop and adopt blockchain technology to create and deploy digital sovereign currencies, or CBDCs.The Reserve Bank of India (RBI), for instance, is in the process of rolling out its own digital rupee to ‘curb damaging consequences’ of private cryptocurrencies.Also read: Cyber security, frauds main concerns with digital currency: RBIHowever, the mainstay of blockchain technology and decentralised finance is that they remove the need for a central governing body. They put transactional control and data privacy back in the hands of their users.