Central Bank Digital Currencies (CBDCs) are government-backed cryptocurrencies that utilize blockchain technology to ensure transparency, security, and efficiency in financial transactions. Blockchain provides CBDC not only immutability and decentralization but also the ability to speed up transactions, reduce processing costs, and increase user trust.
The integration of blockchain in CBDC enhances monitoring of the money flow, which is crucial for economic stability. An example of blockchain use is China's digital yuan (e-CNY), which has been actively tested since 2021. Unlike regular cryptocurrencies like Bitcoin, CBDCs are managed by state institutions and ensure strict control over the issuance and use of funds.
A key advantage of CBDC on blockchain is supporting micropayments and cross-border transactions, as well as reducing risks related to fraudulent transactions and money laundering. Thus, blockchain helps central banks build trust in digital currencies and integrate them into the global economy.
