What is a CBDC?

A CBDC is issued and regulated by a nation's monetary authority or central bank. CBDCs promote financial inclusion and simplify the implementation of monetary and fiscal policy. As a centralized form of currency, they may not anonymize transactions as some cryptocurrencies do.

How will CBDC work in China?

China has a two-tier method to ensure private banks don’t decline if a central bank begins to offer CBDC directly. This method involves banks circulating currency to their customers. The digital cash will be backed by the deposits at the central bank from commercial banks and other institutions.

What is a CBDC and how does it provide a country's Central Bank with the means to implement monetary policies?

A CBDC also provides a country's central bank with the means to implement monetary policies to provide stability, control growth, and influence inflation. Central bank digital currencies would also reduce the risks of using digital currencies in their current form. Cryptocurrencies are highly volatile, with their value constantly fluctuating.

What is the difference between a wholesale CBDC and a holding reserve in a central bank?

Wholesale CBDCs are similar to holding reserves in a central bank. The central bank grants an institution an account to deposit funds or use to settle interbank transfers. Central banks can then use monetary policy tools such as reserve requirements or interest on reserve balances to influence lending and set interest rates.