Preparing for central bank-issued digital currencies

Credit: Edinburgh Law School

“Throughout most of history, money as a tool of payment has taken the form of tangible objects such as coins and banknotes. However, the rapid development of digital technology has changed the payment landscape. In the UK, for example, most of the liquid funds used in payments nowadays consist of intangible bank deposits. So far, these are all privately-created forms of money rather than state-issued legal tender.

“However, this may be about to change. Many central banks are seeking to expand the supply of state-issued intangible money by introducing central bank digital currencies (CBDCs). CBDCs are a form of digital fiat money issued by a central bank. It is simplest to think of them as traditional coins or banknotes issued by a central bank but existing in a purely digital form. CBDCs thus circulate alongside tangible forms of money and perform their traditional functions, i.e., as a unit of account, medium of exchange, and store of value.”

Read the full article, by Fransiska Ari Indrawati, here.