What are CBDCs?

CBDC stands for 'Central Bank Digital Currency', representing the digital counterpart of traditional currencies like the dollar, euro, Argentine peso, or yuan. Issued by each country's Central Banks, their value is tied to the official currency and legally supported by regulatory authorities. This new currency type is being explored by governments globally as a supplementary form of money, rather than a replacement for existing infrastructure.

By being supported by central banks, it makes them designed to meet certain legal requirements, it's centralized, it allows banks to see who owns what, and it doesn't require this person to be the intermediary for the transaction to take place, theoretically, you could make electronic transfers as if you were handing out notes to another person or a business. Benefiting from the lower costs associated with online transactions made through commercial banking, and favouring people with lower incomes and sectors of the population that are not banked, thus betting on financial inclusion

Being a digital instrument made available to citizens, to be used as legal course payment means, it turns them into a third form of official money, in addition to cash and bank money, and are differentiated by the type of verification required when exchanged. For stored-value tokens, they depend essentially on the beneficiary's ability to verify the validity of the object used for the payment, they may be retailers or general-purpose, to which anyone has access, or wholesalers with restricted access only to certain agents and for wholeness settlement use. And those based on accounts, depend fundamentally on the ability to verify the identity of the account holder, those of money deposited is for general use, and that of reserves restricted to reserve and settlement.

We can say that these digital currencies are the antithesis of cryptocurrencies. Why? Because cryptocurrencies are not issued by any central bank, no one regulates their value and move freely through a blockchain technology, they are decentralized and guarantee anonymity. In the market of cryptocurrencies participate investors who are willing to take risks, as prices can boost one day and fall sharply the other. It is an autonomous sector, where users can choose how much and what kind of data they want to disclose because cryptocurrencies are peer-to-peer, that is, equal to equal and without intermediaries.

The implementation of CBDCs poses challenges, as they are a new technology that has the potential to transform the financial system. However, much work remains to be done to determine whether they are viable and whether they provide net benefits for society, and it will all depend on how this system is implemented in accordance with the model that each country defines.