The Digital Currency that Will Transform the Financial System: Understand CBDCs

Central Bank Digital Currencies (CBDCs) represent an important evolution in the global financial system. Unlike traditional cryptocurrencies, a CBDC is an official digital coin issued and regulated directly by a sovereign central bank, with value established by the monetary authority and corresponding to the country's fiat currency.

The Two Models of CBDCs: Who Uses Them?

There are two distinct operating models. Wholesale CBDCs operate exclusively between financial institutions, similar to the reserves that banks hold in the central bank's vaults. They serve to manage liquidity flows and facilitate settlements between institutions, as well as allowing banks to interact with monetary policy tools that control lending rates and influence market interest rates.

Retail CBDCs are developed for the average citizen and businesses. They offer a stable and government-backed exchange currency, eliminating the intermediary risks that exist with private issuers of digital coins. Within this category, there are two technological variants: the token-based, which functions like digital physical money, and the account-based, which requires identity verification of the participant.

The Real Benefits that a Digital Coin Can Bring

The practical impact of CBDCs goes beyond technology. They significantly reduce the costs of maintaining complex financial systems and decrease expenses related to international transfers. For populations without access to the traditional banking system, CBDCs offer a viable path to financial inclusion without the need to build an expensive banking infrastructure in a country.

Furthermore, these digital coins address structural problems of the current system, such as the risk of bank runs, increase financial security, and provide greater privacy in transactions. Users benefit from more accessible and low-cost money transfer methods.

The Global Scenario in Motion

Nations across different continents are at varying stages of development and implementation of their CBDCs. Some are already operational, while others are still testing pilot models. This global trend points to a profound transformation in how we handle currency and payment systems in the coming years.