Eternity Law International News What is CBDC?

What is CBDC?

Published:
September 21, 2022

A central bank digital currency or, shortly, CBDC is explained as a virtual asset that is backed and issued by central banks. As cryptocoins and stablecoins have obtained boosted engrossment from holders, monetary authorities across the globe have decided to create a substitute to physical money or risk missing out on the future of funds. Generally, cryptocoins are grounded on DLT, meaning that a payment’s accuracy is being constantly validated by devices via the world rather than by a single central hub. CBDC in its turn is run on digital ledgers (which may not necessarily be blockchains), making more quickly and more secure payments between banking structures, companies, and clients.

Main peculiarities of CBDCs

A CBDC has an instrument, system, and institutional characteristics which are listed below:

Instrument features:

  • Convertibility (it should exchange at par with cash; operations with it should be straightforward in implementation);
  • Affordability (CBDC payments should have low costs or no costs at all for the end-user);
  • Accessibility (CBDC should be accessible for both online and offline operations).

System features:

  • Security and resiliency (CBDC should ensure the highest levels of protection against any vulnerability and failures in operations);
  • Scalability (CBDC should be capable to accommodate the potential for large-scale volumes possible in the future);
  •  Interoperability (Flow of funds between systems must be easy and available 24/7);
  • Flexibility (CBDC should feature a flexible structure and be adaptive to quickly-changing terms and conditions).

Institutional features:

  • Robust legal mechanisms (the issuance of CBDC should be grounded on unambiguous authority);
  • Compliance with standards (The operation with currency must be in line with enforceable legal and regulative requirements).

CBDC and cryptocoins: main differences

Virtual currency the issuers of whom are central monerary authorities are commonly mistaken for other types of crypto assets. As mentioned above, CBDCs have central banks at the center of every payment. But cryptocoins, such as Ethereum are tokens designed by utilizing cryptographic methods by a DLT or blockchains.

Another distinctive feature between these assets is that cryptocoins use public blockchains where anyone can become a participant in the blockchain network’s essential operations, whilst CBDCs apply private blockchains, distributed ledgers that function as closed, secure databases and are not decentralized.

The limitations on CBDC networks are imposed by monetary authorities. Hence, while cryptocoins feature decentralized nature, CBDCs are developed under the centralization approaches. In this respect, cryptocoins ensure anonymity; while CBDCs allow central banks to see who holds what.

CBDCs should not be mistaken for stablecoins; instead, they would be the fiat currency itself. For example, a CBDC dollar bill would be the same as a common dollar bill. This currency can only be used for payments, any stockpiling or usage for investment purposes is outright banned.

Holders can decide on how much and what kind of data they wish to make public as unquestionably autonomous with a peer-to-peer paradigm. Contrary to this, CBDC payments will automatically send vast amounts of details to tax and supervisory offices.

Please contact us to get more information.

You can see our current offers in the categories “Cryptocoins and licensing of cryptocurrency operations”, “Ready-made companies”, “Banks for sale” and “Licenses for sale”.

You could be interested

Obtaining the citizenship for an investment

Obtaining citizenship for investment – urgent issue for many. It would seem that everyone who has a supply of cash will now want to invest them in a profitable way, since it can be much cheaper to buy something useful, including second citizenship, during a crisis. But the unpredictability of COVID-19 and the lack of...

10 Best FSCA Regulated Forex Brokers in South Africa

When trading currencies, it is essential to consider various things, among them the availability of safe and reliable-brokers. For such cooperation, you should go for regulated-brokers as they are recognized by the regulatory-authorities of the state. Such brokers have proven that they can meet the standards of business relationships that are introduced in this country....

Launch the ICO

BUILDING BUSINESS MODELS If you are engaged in generating cool ideas for creating promising projects – this is half the work in the field of promotion and sales of the finished product, for example ICO. There are a lot of different projects: from the field of IT technologies to hand-made works. In order to embody...

Cryptocurrency Exchange License in Labuan

Crypto exchange/digital assets exchange platform allows you to transfer electronic money and cryptocurrencies. This gives a convenient opportunity to exchange different currencies; for example, you can exchange cryptocurrencies for cryptocurrencies, cryptocurrencies for fiat and fiat for cryptocurrencies. Market participants can pay for cryptocurrencies by credit card, e-wallets and other methods of payment. It is possible...

PI license in the Czech Republic

An authorized payment institution (API) in the Czech Republic is the perfect solution for pan-European and trans-border payment processing. It facilitates processing payments and money transfers of private individuals, companies, and internet merchants. To ensure the proper operation of such institutions and the protection of customer funds, the EU PSD entered force in 2007 and sets...

Steps to get an EMI license in Europe

E-money institutions (EMI) constitute an essential part of Europe’s financial market as they assist individuals and businesses in easily managing their money. Made for the digitalized era, EMIs open access to the main services with finances across various sectors. However, prior to the delivery of services, each organization must apply for a license to ensure...
Fill the blank:

Zurich

Dreikonigstrasse, 31A, Stockerhof

Kyiv

Baseina street, 7

London

Grosvenor Gardens, 52

New York

1178 Broadway, 3rd Floor #3353 New York, NY 10001

Vilnius

Gediminas Avenue, 44A

Tallinn

Kesklinna linnaosa, Tuukri 19

Edinburgh

Lochrin Square, 1

Nicosia

Jacovides Tower, 5 floor

Riga

Esplanade, 7 floor

Hong Kong

18 Harbour Road, 35/F, Central Plaza, Wanchai

Singapore

Level 42, Suntec Tower Three, 8 Temasek Boulevard

Sydney

20 Martin Place

Porto

2609 Avenida da Boavista

Tbilisi

Revaz Tabukashvili Str., N 45, area N 7