Why is it called ๐ฉ๐ซ๐จ๐ ๐ซ๐๐ฆ๐ฆ๐๐๐ฅ๐ ๐ฆ๐จ๐ง๐๐ฒ?
The diagram below shows a typical retail ๐ญ๐ฐ๐จ-๐ญ๐ข๐๐ซ CBDC architecture.
Tier 1 is the ๐๐๐ง๐ญ๐ซ๐๐ฅ ๐๐๐ง๐ค, which is in charge of ๐ข๐ฌ๐ฌ๐ฎ๐ข๐ง๐ CBDC. Unlike cash, the issuing doesnโt involve printing out money, rather it is just a digital currencies that exist in the central bankโs system.
Tier 2 is the ๐๐ข๐ง๐๐ง๐๐ข๐๐ฅ ๐ข๐ง๐ฌ๐ญ๐ข๐ญ๐ฎ๐ญ๐ข๐จ๐ง๐ฌ, including commercial banks, which are in charge of CBDC ๐๐ข๐ซ๐๐ฎ๐ฅ๐๐ญ๐ข๐จ๐ง. They talk to businesses and individuals that hold CBDC for payment transactions.
More than 60 countries have been experimenting with CBDC since 2014, of which 88% use blockchains as low-level tech to build their systems. So smart contracts can be applied to the money. Thatโs why it is called programmable money.
๐ What problems does CBDC solve?
โถ๏ธ Digitalize money transactions to make them completely traceable
โถ๏ธ Improve payment efficiency and security
โถ๏ธ Improve cross-border payment efficiency
