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A central bank digital currency (CBDC) is digital money denominated in a country’s currency and issued as a direct liability of its central bank. That direct claim on the central bank—not whether the system uses blockchain—is what makes it a CBDC.
What “central bank digital currency” means
The Bank for International Settlements (BIS) defines a CBDC as “a digital payment instrument, denominated in the national unit of account, that is a direct liability of the central bank.” In plain language, the central bank issues the money, it exists in digital form, and its holder’s claim is against that central bank. BIS, Annual Economic Report 2021, Chapter III
The definition does not say that a CBDC must be interest-bearing, account-based, token-based, or recorded on a distributed ledger. Those are design decisions that differ by project and jurisdiction. The key test is the issuer and the liability.
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Retail CBDC
A retail, or general-purpose, CBDC is intended for use by the public in everyday payments. It would make digital central-bank money available to eligible people and businesses, subject to the system’s access rules.
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Wholesale CBDC
A wholesale CBDC is intended for eligible financial institutions, rather than the public. Its potential role is in transactions such as interbank transfers and wholesale settlement. It shares the central-bank liability characteristic of retail CBDC, but has a different user group and purpose.
The BIS describes both forms and their possible uses in its CBDC executive summary.
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How CBDC differs from other digital money
Many forms of money and payment are digital. To identify a CBDC, look at who owes the money to its holder, not just how a payment is made or how quickly it arrives.
| Form | Issuer and holder’s claim | Typical distinction |
|---|---|---|
| Retail CBDC | Central bank; direct central-bank liability | Digital central-bank money intended for public use. |
| Wholesale CBDC | Central bank; central-bank liability available to eligible financial intermediaries | Designed for interbank transfers and wholesale settlement. |
| Commercial bank deposit | Commercial bank; liability of that bank | Digital money accessed through a bank account, not a direct claim on the central bank. |
| E-money | Private e-money issuer; private liability | A private digital-money arrangement, not central-bank money. |
| Stablecoin | Private issuer; claim and backing depend on the arrangement | A target price or peg does not turn it into a central-bank liability. |
| Fast payment system | Payment arrangement; may transfer private-sector liabilities | Can make payments fast without changing the issuer of the money being transferred. |
The IMF distinguishes CBDC as public money from fast payment systems that speed transfers of private liabilities and from privately issued e-money. These arrangements can pursue similar efficiency goals, but they are not the same kind of money. IMF, Central Bank Digital Currency: Progress and Further Considerations
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Does CBDC mean cryptocurrency or blockchain?
No. “CBDC” describes money by its issuer and liability: it is a central-bank obligation. Cryptocurrency commonly refers to privately created digital assets, and a CBDC is not defined by that category. Nor does the term require blockchain or any other particular ledger technology. A central bank may choose among technologies and architectures; those choices do not change the core definition.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why consider a CBDC, and what are the tradeoffs?
Central banks may consider retail CBDCs as a way to provide risk-free digital central-bank money for everyday transactions, support access where private services leave gaps, or provide public payment infrastructure. Wholesale designs may support conditional settlement and automation. These are possible objectives, not guaranteed outcomes: affordability, inclusion, and efficiency depend on local needs and system design. The BIS discusses these rationales and risks in its CBDC executive summary.
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A CBDC is not automatically preferable to improving existing payment arrangements. The IMF recommends assessing current systems, private-sector innovation, institutional capacity, and local priorities before deciding whether a new central-bank service is needed. IMF policy paper
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- Bank funding and financial stability: If customers move deposits into retail CBDC, banks could lose a source of funding. A rapid shift during a period of stress could intensify a run. Holding caps, remuneration policies, and data-governance rules are possible mitigations, not universal requirements.
- Public and private roles: In a one-tier model, the central bank handles customer onboarding and servicing. Two-tier or hybrid models involve private providers in customer-facing functions, with different implications for service continuity, privacy, central-bank responsibilities, and private innovation.
- Access and interoperability: A system must set eligibility, identity, intermediary, and potentially cross-border rules. Cross-border use requires compatible arrangements and international coordination.
CBDC projects and issuance status vary by jurisdiction and change over time. A 2021 BIS report described the decisions of its participating jurisdictions at that publication date; it is not a current global inventory and should not be read as a statement about today’s launches. BIS and participating central banks, 2021 executive summary
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