Definition
A CBDC (Central Bank Digital Currency) is a sovereign digital currency created, issued, and managed by a country’s central bank. It represents a direct digital liability of the central bank, similar in status to physical cash but existing only in electronic form. Unlike decentralized cryptocurrencies, a CBDC is centrally governed and designed to operate within the existing monetary and regulatory framework of the issuing jurisdiction.
CBDCs are typically denominated in the national unit of account and are intended to function as legal tender for payments and settlements. Their design can vary in terms of privacy, programmability, and access models, but they remain anchored to the central bank’s balance sheet. As a concept, CBDCs intersect with areas such as Compliance, AML, and KYC because their issuance and use are tightly integrated with formal financial regulation and oversight.
Context and Usage
In the broader digital asset ecosystem, a CBDC is often contrasted with a Stablecoin, which is typically issued by private entities and may carry different forms of Regulatory Risk. CBDCs aim to provide a digitally native version of central bank money that can circulate alongside cash and commercial bank deposits, while remaining fully embedded in the supervised financial system. Their introduction can influence how payment infrastructures, financial intermediaries, and on-chain or off-chain settlement environments are structured.
Because CBDCs are issued by public authorities, their design and deployment are closely tied to policy objectives such as financial stability, payment system resilience, and regulatory transparency. This makes CBDCs a focal point for discussions around AML and KYC standards, as they can be architected to support granular oversight and compliance controls. As a concept, CBDCs sit at the intersection of monetary policy, digital payments technology, and evolving regulatory frameworks for digital assets.