This post is originally published in Data Driven Investor.
Over the last few months, there has been a lot of buzz around “Digital Currency”. Coined “Central Bank Digital Currency” or CBDC, this novel currency refers to the digital version of fiat money. CBDC, unlike the cryptocurrencies, stablecoins, mobile wallet money and credit cards we know of today, is a government-issued electronic money. This currency is a legal tender, a government-backed IOU. The objective of this money varies from adding a new payment system to replacing the paper notes and coins. This has the potential to reach to a wider populace than currently covered in the monetary system. Hence this currency can be a formidable financial instrument of the future.
Despite the many merits, why are countries not rushing to introduce this new form of money? Why are countries spending years on research and launching long term pilots? What are the key considerations for effectively implementing a digital currency?