A central bank digital currency (CBDC) is the digital version of the official currency (fiat currency) of a country. It is an electronic record or digital token of the official currency and is issued and is regulated by its monetary authority. As cryptocurrencies and stablecoins have become more popular, the world’s central banks have realized that they need to provide an alternative—or let the future of money pass them by.
The approach to designing a CBDC will likely vary a lot based on the issuing country. Some implementations will likely be based on blockchain or some other type of distributed ledger technology (DLT), while others could likely be just a centralized database. The blockchain-based ones will use a token to represent the digital form of fiat currency.