Types of CBDCs
Wholesale CBDCs and retail CBDCs are the two primary categories of CBCDs. The former largely serves the country’s financial institutions, while the latter serves people and companies on a daily basis.
1. Wholesale CBDC
A wholesale CBDC is a CBDC that is sold to financial institutions. Interbank transfers and related wholesale transactions are settled via wholesale CBDCs. Making a cross-border transaction using central bank digital currency is one of the ways they are used in the interbank system. Furthermore, central bank reserves and wholesale CBDCs work in the same way.
2. Retail CBDCs
Central banks distribute retail CBDCs directly to the people as a form of digital currency. With cash use decreasing in today’s digital economy, a retail CBDC could undoubtedly be an advancement in the digital economy if it were available to everyone. Central banks in countries would be responsible for determining whether CBDC would be available.
What is Central Bank Digital Currency (CBDC): How Does It Work?
CBDC, or Central Bank Digital Currency, has been in development for some time now. The main reason why private cryptocurrencies have gained popularity is due to the fact that they seek to replace centralized financial institutions with decentralized ones. So, what exactly is CBDC?