What are Digital Currencies issued by Central Banks?

A CBDC is simply a digital currency. Like traditional fiat currencies, it provides holders with a direct claim on the central bank and enables companies and people to conduct electronic payments and transfers. 

It eliminates the need for intermediaries in financial transactions, particularly banks, and lets transactions go directly from person to person or client to vendor. 

Also, it reduces customer risks, such as the failure of a commercial bank, and establishes a direct link between consumers and a central bank.

Because of the rising popularity of cryptocurrency, central banks are concerned about losing control over the supply of money and payment networks. The expansion of payment methods that any central or public agency does not supervise may erode central banks' control over the money supply and economic stability. 

CBDCs are inspired by cryptocurrencies such as Bitcoin and Ethereum; however, distinctions. Cryptocurrencies are uncontrolled and distributed. They are volatile since investors, usage, and conjecture determine their worth. This volatility may be observed in the price changes of Bitcoin over the last year. CBDCs should be more stable and safe because their value is fixed to a country's currency.

Crypto and CBDCs leverage networked electronic resources to generate, track and validate transactions. Many CBDCs, on the other hand, have a central database managed by a central bank that assigns a unique serial number to each 'e-coin' created as a means of identifying it. 

"The history of money is beginning a new chapter," said Kristalina Georgieva, The International Monetary Fund's Managing Director, in an address at the Atlantic Council this week. 

"Countries are attempting to maintain important parts of their existing monetary and financial systems while experimenting with new digital forms of money."