CBDC: Safe and Practical Digital Money of the Future!

Digital money has become part of our daily lives. We often use electronic money, digital wallets, or crypto to make online transactions. One interesting digital money is CBDC.

Want to know more about CBDC? You can find out about CBDC in this article!

What is CBDC?

CBDC is digital money issued and guaranteed by a central bank. It is used as legal tender to replace currency.

CBDC will act as a digital representation of a country's currency, such as the rupiah, dollar or euro. CBDC is different from electronic money or crypto, because CBDC does not require intermediaries such as banks or online platforms to carry out transactions.

CBDC is also different from cash, because CBDC does not have a physical form and only exists in the digital world.

Why is CBDC Needed?

CBDC is needed to answer the challenges and opportunities in the digital era. Some reasons why CBDC is needed are:

Increasing financial inclusion

CBDC can help people who do not have access to formal financial services, such as banks or fintech, to participate in the digital economy. CBDC can be accessed via a smartphone or other internet-connected device, without the need to open a bank account or pay additional fees.

Increase transaction efficiency and security

CBDC can speed up and simplify the payment process, both domestic and cross-border. CBDCs can also reduce the risk of fraud, money laundering or terrorism, as they can be tracked and verified by central banks.

Increasing the stability of the financial and monetary system 

CBDCs can help central banks manage the demand and supply of money, as well as control inflation. CBDCs can also help central banks anticipate the impact of developments in financial technology, such as crypto, that could threaten the sovereignty of national currencies.

How CBDCs Work?

CBDC works using distributed ledger technology (DLT). This is a data recording system spread across many interconnected computers.

DLT allows CBDC transactions to be carried out directly, securely and transparently, without the need for intermediaries. DLT also allows CBDCs to have advanced features, such as programmability, namely the ability to add certain functions or rules to the CBDC, such as time limits, conditions, or incentives.

How is CBDC Development in the World?

CBDC is in the research and testing phase in various countries. Some countries that have launched or are planning to launch CBDC are:

China

China is one of the countries most aggressive in developing a CBDC, called Digital Currency Electronic Payment (DCEP) or e-CNY. China has conducted CBDC trials in several large cities, such as Beijing, Shanghai and Shenzhen.

China plans to officially launch a CBDC in 2022, to coincide with the Winter Olympics in Beijing.

Sweden 

Sweden has one of the lowest cash usage rates in the world. Sweden has been conducting research on CBDCs since 2017, and began trials in 2020. Sweden's CBDC is called e-krona, and uses the Corda platform, developed by the R3 consortium. Sweden plans to fully launch e-krona in 2026.

Indonesia 

Indonesia is one of the countries interested in CBDC, considering the market potential and development of the digital economy in Indonesia. Bank Indonesia (BI) has been conducting research on CBDC since 2020.

Furthermore, BI published a white paper on the design of Indonesia's CBDC, called Digital Rupiah, in 2022. Bank Indonesia also conducted a public consultation on CBDC in 2023, and plans to conduct trials in 2024. Indonesia's CBDC uses the Hyperledger Fabric platform, which was developed by the Linux Foundation.

What are the Benefits and Challenges of CBDC?

CBDC has many benefits, as explained previously. However, CBDC also has challenges and risks that need to be anticipated, such as:

Changes in people's behavior 

CBDC can influence people's preferences and habits in using money. CBDC can reduce the use of cash, which could impact sectors that still depend on cash, such as MSMEs or street vendors.

CBDCs could also increase demand for digital money, which could lead to capital outflows or bank runs, if the public loses trust in commercial banks.

Changes in the role and function of commercial banks 

CBDC can change the role and function of commercial banks in the financial system. CBDC can reduce commercial banks' sources of income from transaction fees or loan interest, because people can transact or store money directly at the central bank.

CBDC can also reduce the intermediation function of commercial banks in creating demand deposits, because people can convert demand deposits into CBDC easily.

Changes in central bank policies and regulations 

CBDC can change central bank policies and regulations in maintaining financial and monetary system stability. Central banks will need to adjust monetary policy instruments and mechanisms, such as interest rates or reserve requirements, to accommodate CBDCs.

Central banks also need to set appropriate regulations and standards for CBDCs, such as access, identity, privacy or security requirements.

What Needs to Be Prepared to Welcome CBDC?

CBDC is the digital money of the future that will bring major changes in the financial and monetary system. To welcome CBDC, we need to prepare several things, such as:

Increasing digital financial literacy 

We need to understand the concept and characteristics of CBDCs, as well as their benefits and risks. We need to follow the latest developments and information about CBDC from trusted sources, such as central banks or credible media. We also need to improve our skills and knowledge about financial technology, such as DLT, crypto or fintech.

Improving digital infrastructure and access 

We need to ensure that we have adequate devices and internet connections to access and use CBDC. We need to choose devices that are safe, trustworthy, and comply with the standards set by the central bank.

We also need to choose a quality, fast and stable internet service provider.

Increase cooperation and coordination between stakeholders 

We need to increase cooperation and coordination between central banks, governments, commercial banks, technology companies, academia, and society, to support the development and implementation of CBDCs.

We need to provide input, suggestions or constructive criticism to the central bank, so that CBDC can be adapted to the needs and conditions of society.

How To Buy Crypto With Bittime

You can buy and sell crypto assets in an easy and safe way via Bittime. Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappbeti. 

To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet . For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application. 

Monitor price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

Read also:

Eurostable Coin: The Euro-Based Digital Currency Revolution

What Is Digital Dollar? How is it Different from Crypto?

Get to Know Off-Ledger Currency and Its Benefits

What is Decentralized Currency?

DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.