A Central Bank Digital Currency (CBDC) is a digital version of a country's fiat currency that is issued and regulated by the central bank. Unlike cryptocurrencies, which are decentralized and typically operate on public blockchains, CBDCs are centralized and backed by the government, providing the same stability and trust as traditional fiat currencies. The primary objective of a CBDC is to enhance the efficiency, security, and inclusivity of the payment system. It can provide a modern alternative to cash, improve financial inclusion by making digital payments accessible to unbanked populations, and streamline monetary policy implementation. CBDCs can also help reduce costs associated with physical currency management and mitigate risks related to fraud and counterfeiting. Various countries are exploring or piloting CBDC projects, aiming to integrate the advantages of digital currency with the regulatory oversight of traditional banking systems.
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