CBDC (Central Bank Digital Currency) is the generic term for digital currencies issued by central banks. A distinction is made between the following categories:
Could be just one currency, e.g. the PBOC project, or something more unconventional, like the concept Mark Carney talked about (a possible new reserve currency composed of several currencies).
A Wholesale CBDC is essentially the equivalent of current fiat currencies (physical bills and coins) converted into a digital currency. Issued by countries’ central banks and distributed by commercial banks- a familiar traditional concept where citizens do not have a direct account with the central bank.
A value-based wholesale CBDC would replace or supplement reserves at the central bank with a digital token with limited access. A token would be a bearer asset, meaning that the sender transfers value to the receiver during the transaction without an intermediary. This would be something fundamentally different from the current system, in which the central bank debits and credits account without transferring actual value.
The wholesale CBDC is seen as the most popular proposal among central banks because of its potential to make existing wholesale financial systems faster, cheaper, and safer. The Bank for International Settlements (BIS) also agrees that a wholesale CBDC could benefit payment and settlement systems.
A retail CBDC is issued to the general public. A concept that the Riksbank is looking at (project phase), which has a key difference from the “traditional CBDC concept”: every citizen would have an account at the central bank where they would be able to deposit and withdraw their digital money. Distributed Ledger Technology (DLT) basically has the desired features of anonymity, traceability, availability 24/7/365, and the feasibility of an interest application.
The retail proposition is relatively popular among central banks in emerging markets, largely because of the motivation to take the lead in the rapidly emerging fintech industry, promote financial inclusion by accelerating the transition to a cashless society, and reduce the cost of printing and handling cash.