What are CBDCs And Their Role in the Future of Finance?


TL;DR Breakdown


  • Central Bank Digital Currencies (CBDCs) are similar to cryptocurrency and are issued by a governmental central bank, with full backing from the government.
  • They feature secure governance, regulation, and global accessibility, making them suitable for international transactions.
  • Cryptocurrency is restricted to certain countries and jurisdictions while CBDCs will be accessible to anyone in its country of origin.
  • Introducing CBDCs could revolutionize how money is exchanged around the world.

With the rise of cryptocurrency and blockchain technology, governments around the world are exploring the possibility of introducing their own digital currencies. Central Bank Digital Currencies (CBDCs) are digital tokens, similar to cryptocurrency, issued by a central bank. They are pegged to the value of that country’s fiat currency and would have full faith and backing from the government that issues them. CBDCs could provide businesses and consumers with privacy, transferability, convenience, accessibility, and financial security while also reducing transaction costs across borders.

Tomas Holub, a Czech National Bank board member, has said that CBDC is helicopter money. His remarks are different from other central bank spokespersons who are actively looking to experiment with central bank digital currencies. Theoretically, helicopter money is considered harmful as it can stoke unnecessary inflation. Let’s see if there’s validity in this tagging.

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Key differences between CBDCs and cryptocurrencies

Cryptocurrency and Central Bank Digital Currency (CBDC) are both digital tokens, but there are some important differences between them. Here are five key distinctions that separate crypto from CBDC:

1. Governance: Cryptocurrencies are typically decentralized and managed by the community who use them, while CBDCs are centralized and controlled by a national government.

2. Regulation: Cryptocurrencies are largely unregulated, while CBDCs will be subject to government regulation. For instance, CBDCs may have to adhere to certain regulations, such as KYC/AML laws, while cryptos do not.

3. Security: Cryptocurrencies are secured through the use of cryptography and distributed ledger technology, while CBDCs may use similar technologies but also traditional banking security measures like authentication or PIN numbers.

4. Accessibility: Cryptocurrency is currently restricted to certain countries and jurisdictions, while CBDCs will be accessible to anyone in its country of origin.

BitMex former CEO Arthur Hayes calls CBDCs “pure evil

Benefits of CBDCs

Overall, CBDCs have the potential to revolutionize how money is exchanged around the world. They could provide businesses and consumers with financial security, and provide those who currently use alternative money transfer methods with lower-cost options. With the way countries continue to launch their respective CBDCs, it is clear that they will play an important role in the future of finance. Here are some of the key benefits of CBDCs:

– Increased financial inclusion for those who are currently excluded from the traditional banking system.

– Reduced transaction costs and increased speed of transactions across borders.

– Improved privacy and security for users, as well as reduced risk of fraud or theft due to the use of cryptography and distributed ledger technology.

– Greater trust in the digital financial system, allowing users to take advantage of new and innovative tools.

– Increased transparency, as all transactions are recorded on a blockchain and can be tracked by both the sender and receiver.

Threats to countries with no CBDCs

Role in the future of finance

Financial inclusion in the Middle East and North Africa (MENA) region remains relatively low despite the opulence of its major cities. Global Findex revealed that only 53% of adults in MENA have an account (including mobile money) as of 2021, up from 38% in 2011. By comparison, the same headline indicator for Sub-Saharan Africa in 2021 stood at 55%, 68% in South Asia, 74% in Latin America and the Caribbean, 83% in East Asia and the Pacific, and 90% in Europe and Central Asia, while the World average was 76%. MENA policymakers should realize that financial inclusion could be an untapped resource by introducing a Central Bank Digital Currency (CBDC).

CBDC could serve as a tool to facilitate financial inclusion if policymakers can guarantee that the fundamental enablers (highlighted in the Payment Aspects of Financial Inclusion guidelines) are in place. There are valid concerns about implementing CBDC, primarily that the same challenges could derail the projects similar to other approaches used to serve the unbanked customers (e.g. digital payments such as mobile money).


The bottomline is Central Bank Digital Currencies (CBDCs) have the potential to revolutionize global finance through the numerous advantages mentioned above. These digital currencies are also designed to be adequately secure as they will have access to traditional banking security features such as authentication or PIN numbers. With their robust governance, regulation, security features, and global accessibility they are sure to shape the future of finance.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.


What are the benefits of CBDCs?

The potential benefits of CBDCs include increased trust in the digital financial system, increased transparency, improved speed of payments across borders, and potentially even a reduction in transaction costs.

Do CBDCs pose any risks?

Yes, there are some potential risks involved with CBDCs such as cybersecurity threats due to their digital nature and the possibility that governments may impose tight regulations on them over time. 

How is the privacy of CBDCs ensured?

The use of distributed ledger technology provides a layer of security that ensures the privacy and security of financial transactions. This includes features such as using encryption, digital signatures, and authentication protocols.

What types of transactions can be made with CBDCs?

With CBDCs, users are able to make payments and have the ability to transfer funds in a secure and transparent manner. They can also be used for sending remittances or settling cross-border payments.

Alden Baldwin

Alden Baldwin

Journalist, Writer, Editor, Researcher, and Strategic Media Manager: With over 10 years of experience in the digital, print and public relations industries, he has been working with the mantra, Creativity, Quality and Punctuality. In his waning years promises to build a a self sustaining institute that provides free education. He is working towards funding his own startup. As a technical and language editor, he has worked with multiple top cryptocurrency publications such as DailyCoin, Inside Bitcoins, Urbanlink Magazine, Crypto Unit News and several others. He has edited over 50,000+ articles, journals, scripts, copies, sales campaign headlines, biographies, newsletters, cover letters, product descriptions, landing pages, business plans, SOPs, e-books, and several other kinds of content.

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