## CBDC: how central bank digital currencies are changing the financial system

Central banks around the world are actively working on creating their own digital currencies. CBDC is an official means of payment in electronic form that is issued and controlled by the central bank of each country. The difference from cryptocurrencies is simple: the value of CBDC is always tied to fiat currency and is guaranteed by the state.

### Two options for digital currencies for different tasks

The CBDC system is divided into two directions, each addressing its own tasks. **Wholesale CBDCs** operate between financial institutions and central banks — this is a tool for managing liquidity and simplifying settlements. Banks use them as electronic reserves, ensuring more flexible use of monetary policy tools and control over interest rates.

**Retail CBDCs** are aimed at citizens and businesses. They provide a state-backed secure method of payments, eliminating the risks of intermediaries such as the potential bankruptcy of private payment systems. Retail currencies exist in two formats: token-based ( operate like cash ) and account-based ( require user identification ).

### Problems that CBDCs solve

CBDCs help tackle serious challenges in the financial system. They prevent mass withdrawals of deposits by alleviating concerns about the reliability of fund storage. At the same time, the fees for international transfers are significantly reduced, lowering the cost of transactions.

It is especially important that CBDCs open financial access for unbanked individuals, relieving governments of the need to build costly banking infrastructure. At the same time, it ensures the necessary level of privacy, data protection, and convenience for all participants.

Thus, central banks see CBDC as a means to modernize payment systems, ensure financial stability, and expand access to banking services for the entire population.