Central banks around the world are increasingly interested in digital currencies, with 134 countries currently exploring the possibility of a central bank digital currency (CBDC). A recent study by the US-based Atlantic Council found that 66 of these countries are in the advanced phase of exploration, with some already in the development, pilot, or launch stage.
A CBDC is a digital form of a country’s fiat currency distributed by its national bank and backed by the government. Unlike cryptocurrencies, CBDCs are backed by the central bank and provide a public option for digital payments.
The European Central Bank (ECB) recently launched the digital euro project in July 2021, aiming to provide a universally accepted digital currency for all euro area residents. The digital euro would complement cash and reduce dependence on non-European payment providers.
The project is currently in the preparation phase, with the ECB finalizing rules for regulating digital currency payments and ensuring user privacy and security. If launched, users would set up a digital euro wallet through a bank or post office and have the option to use cash for transactions.
The decision on whether to implement a digital euro is expected by October 2025. The ECB aims to offer a secure and private digital currency that enhances consumer convenience while maintaining the option to use traditional cash for payments.
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