This year, pandemic and all, central bank digital currencies (CBDC) got their 15 minutes of fame. In 2019, Facebook awakened central banks to the possibility of serious private competition. And although libra, now diem, remains a paper tiger, it’s not difficult to imagine other Big Tech firms joining the pack. Central banks had to up their monetary game – and so they did.
The end of this strange year is a good time to look at the state of play on CBDCs and revisit some fundamental questions, starting with the most basic: What is a CBDC? With so many definitions and models out there, it’s become harder (not easier) to understand what CBDC means. Here is a good starting point: a CBDC is a direct claim on the central bank. You own or hold something that was directly issued by the central bank, not by an intermediary.
This post is part of CoinDesk’s 2020 Year in Review – a collection of op-eds, essays and interviews about the year in crypto and beyond. Marcelo M. Prates is a lawyer at the Central Bank of Brazil and holds a doctorate from Duke University School of Law. The views and opinions expressed here are his.