Many countries', including the United States, central banks are trying to figure out Central Bank Digital Currency (CDBC). This move has accelerated after China introduced its digital currency (e-CNY). But why do we need a digital currency when most of my transactions (presumably true for most people in a modern economy) is digital? I receive my salary via a bank transfer, make payments in grocery stores via credit cards, deposit checks via my phone by taking pictures of them, and split restaurant bills via Zelle. All that is digital - no cash is involved.
Explain to me like I am 5 - What problem does a digital currency solve that is not solved by electronic (digital) transfer mechanisms of existing fiat money? Links
- US Federal Reserve working paper on CDBC https://www.federalreserve.gov/central-bank-digital-currency.htm
- European Central Bank on digital currency https://www.ecb.europa.eu/paym/digital_euro/html/index.en.html
- Details on Chinese e-CNY https://en.wikipedia.org/wiki/Digital_renminbi
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