A central bank digital currency (CBDC; also called digital fiat currency or digital base money) is a digital currency issued by a central bank, rather than by a commercial bank. It is also a liability of the central bank, unless it is dividend-paying, then it is an ownership stake in the central bank, and is a new form of legal tender, unlike regular retail CBDC which is denominated in the sovereign currency, as is the case with physical banknotes, coin and existing reserves.
The two primary categories of CBDCs are retail and wholesale. Retail CBDCs are designed for households and businesses to make payments for everyday transactions, whereas wholesale CBDCs are designed for financial institutions and operate similarly to central bank reserves.
Retail CBDCs can be distributed through various models. In the intermediated model, the central bank issues the CBDC and manages core infrastructures, while financial intermediaries offer customer services. The ECB and the Federal Reserve have proposed intermediated CBDCs. Alternatively, the central bank could either provide the full service or delegate responsibilities...
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