Central Bank digital currency types , pros and cons of it's use.
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Greetings to all of you!!
Central Bank digital currency basic knowledge,its types and what are the benefits and challenges of using it I am going to discuss here today with all of you.
Central bank is it responsible for the regulation of digital currency of a particular country and this currency is known as Central Bank digital currency. If we talk about its working then most of the time it works on blockchain or any other ledger technology which permits for more secure and transparent transactions to be occur.
Central Bank digital currency can be used for;
- Payments
- Remittences
- Financial inclusion
Central Bank digital currency can make payment systems more efficient by improving reduction in the costs. Central Banks have direct control at financial stability and it is provided by Central Bank digital currency and it also increase private cryptocurrency by offering more secure digital currency alternative.
Here I am explaining the types of central bank digital currency.
-Retail central bank digital currency
-Wholesale central bank digital currency
Retail CBDC | Wholesale CBDC |
---|---|
Retail Central Bank digital currency is accessible for everyone and it is open to public | Wholesale Central Bank digital currency is not accessible to everyone because it is restricted to financial institutions. |
Day to day transactions can be done through retail Central Bank digital currency and it occurs just in the way of digital payment methods | Interbank transactions can be done through wholesale Central Bank digital currency and day to day transactions don't occur here. |
They are different advantages and disadvantages of using Central Bank digital currency.
Pros of CBDC
Financial inclusions can become more enhanced by the use of Central Bank digital currencies and banking service to those that have little access to traditional banking systems could also be provided by the use of Central Bank digital currency.
By the use of Central Bank digital currency speed of transactions and their efficiency also increases as well as it is also very helpful in the reduction of costs of different transactions.
By the use of Central Bank digital currencies security could also be very enhanced which prevents different kind of fraud so this is also a plus point.
Cons of CBDC
By the use of Central Bank digital currency it is very important to provide security to transactions but on the other hand one thing is very challenging and it is the maintenance of the regulatory compliance.
There is a need to have a very strong and scalable technology infrastructure for the support of Central Bank digital currency operations but it is not much easy to build that type of infrastructure.
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