A CBDC is a new type of currency aiming to work in tandem with fiat currencies used worldwide. The main component of CBDCs which sets them apart is the fact they operate on a blockchain, creating a token of the country’s currency and recording all transactions of that token in an immutable way. CBDCs are still very much in their infancy, with most countries still experimenting with the concept. Shearman partner Barney Reynolds shares his thoughts on the benefits of CBDCs, and whether they will ever eliminate crypto. Read the article in the FinTech Times.
The potential benefits of CBDCs include simplifying back-office processes, saving costs and potentially de-risking the financial system. Currently, certain payments are implemented on an end-of-day basis, which leads to intraday risk. CBDCs can facilitate cheaper and safer settlements, allowing for instantaneous payment, with nobody waiting for their money.