Decentralization is the final frontier for CBDCs
As central bank digital currencies, or CBDCs, continue to garner mainstream traction across the global financial landscape in recent years, almost all central banks are actively researching the benefits and risks of offering a digital currency to the public. In its most basic sense, a CBDC is a digital form of fiat money, backed by a suitable amount of monetary reserves like gold or foreign currency reserves. Each CBDC unit acts as a secure digital instrument equivalent and can be used as a way of payment, a store of value and an official unit of account. What distinguishes them from stablecoins — similar digital offerings whose value is pegged to fiat — is that they are government-issued and backed by central bank-issued money, making them completely regulated. China‘s Digital Currency Electronic Payment, or DCEP, project is arguably the most advanced CBDC trial, which has already been rolled out for consumer testing across major regions of the country including Beijing, Suzhou, Shenzhen and, most recently, Chengdu. With the country aiming to release the digital yuan before next year’s Winter Olympics, China is positioning itself as a global leader within the digital currency sector. While the digital yuan was initially quite limited in its overall