Blog by Cigniti Technologies

Central Bank Digital Currency (CBDC): Here is All You Need to Know

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As the name suggests, CBDC is the central bank-issued digital currency. It is an electronic form of sovereign currency that will appear as a liability on a central bank’s balance sheet just like physical currency. Instead of printing money, the central bank, backed by the central government, issues electronic coins or money. CBDCs are not meant to replace cash but to coexist as additional payment methods. CBDCs should be exchangeable at par with cash. They are regulated by a country’s monetary authority and are implemented using a database that the central bank or government controls.

Why are Central Banks coming up with CBDCs?

During the COVID-19 pandemic, countries have experienced a significant decrease in the use of physical currency, increased people’s interest in cashless societies and digital and virtual currencies, and the evolution of cryptocurrency and blockchain technology. To meet the public’s need for digital currencies and prevent the consequences of private currencies or cryptocurrencies, central banks began popularizing a more acceptable government-backed electronic form of money. Like paper notes issued by banks, CBDCs are also a digital means of payment; just like paper currency, each unit will be uniquely identifiable.

Difference between CBDC and Cryptocurrency:

Though the idea of central bank digital currencies came from cryptocurrencies and blockchain technology, and both are virtually represented assets, CBDCs differ from cryptocurrencies.

Difference between CBDC and mobile money:

Below is the list of potential advantages which CBDC will bring to the government:

CDBC will benefit people in the following way:

There are some challenges as well which need to be addressed while CBDC is being implemented:

CBDCs are available in 2 forms:

There are two types of CBDCs:

The two types of CBDCs, wholesale and retail, are not mutually exclusive. It is possible to develop both and have them function in the same economy.

Implementation of CBDC:

CBDCs use distributed ledger technology (DLT), where financial records, such as how much money a person has and what transactions they’ve made, are stored in a ledger. Instead of one central database storing all the financial records of people, DLT is composed of several copies of this transaction history, each stored and managed by a separate financial entity and usually managed from the top by the country’s central bank. These financial entities share DLT in a distributed manner. This is a permissioned blockchain because only a few entities can access and/or alter the blockchain. In addition, central entities control who gets access to the blockchain and what they can do with it.

Governments are choosing DLT technology because they can still retain control of the money supply. Governments have a central bank in charge of the country’s money supply. These powerful banks choose when to remove or add money to the supply to stimulate the economy in troubled times and set national interest rates.

To check the status of the implementation of CDBC across the globe, please visit the Central Bank Digital Currency (CBDC) Tracker (


In 2022, the Global Currency Initiative proposed further developing a decentralized CBDC. A decentralized CBDC is a CBDC that is issued and controlled by many countries’ central banks together. The decentralized CBDC is only for international transactions between member countries. At the same time, domestic transactions continue to use each country’s national currency.

A few aspects which need to evolve further with CBDC are:

Cigniti is one of the few IT service providers to have invested in a couple of its own blockchain sandboxes across Hyperledger Fabric & R3 Corda technologies which are distributed ledger technologies. These sandboxes are designed to quickly create a viable prototype for any business application providing a ready environment to test the viability of the CBDC concept and effectiveness of its configuration.

Cigniti offers targeted testing services for applications that include comprehensive validation methods across API testing, functional/non-functional testing, integration testing, security testing, compliance testing, and performance testing and also includes specialized testing features, such as peer/node testing and smart contract testing.

Need help? Talk to our Blockchain Testing experts to learn more about Hyperledger Fabric & R3 Corda and identify the issues a typical distributed ledger project has, and how Cigniti can help in implementing project using distributed ledger technologies.


  • Payel Ghosh has 18 years of experience in diverse technology projects in the banking and payments domain. She has rich experience and knowledge in the payments value chain and in-depth subject matter expertise in payment processing. Payel is a consultant with Cigniti's BFSI Practice and Centers of Excellence that focuses on building deep domain competence and developing solutions for the challenges faced by the industry.

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