A central bank digital currency (CBDC) is a digital or electronic form of a country’s fiat currency that is issued by its central bank. It is similar to physical cash, but it exists only in digital form and can be used for electronic payments. CBDCs are not cryptocurrencies, which are not issued by central banks and are not backed by any government.

Some people have proposed the idea of a CBDC that is based on blockchain technology, which is the same technology that underlies many cryptocurrencies. However, such a CBDC would still be a CBDC, not a cryptocurrency.

The main difference between a CBDC and a cryptocurrency is that a CBDC is issued by a central bank and is backed by the government, while a cryptocurrency is not issued by any central bank and is not backed by any government. This means that CBDCs are generally more stable than cryptocurrencies, but they also have less potential for growth.

It is possible that some central banks may choose to issue CBDCs that are based on blockchain technology. However, it is important to remember that such CBDCs would still be CBDCs, not cryptocurrencies.

CBDCs have the potential to offer a number of benefits, including:

• Increased efficiency and speed of payments: CBDCs can be used to make payments more quickly and efficiently, as they do not require the physical transfer of cash.
• Improved financial inclusion: CBDCs can make it easier for people who do not have access to traditional financial services to participate in the economy.
• Enhanced monetary policy: CBDCs can give central banks more control over the money supply and interest rates.

However, there are also some potential risks associated with CBDCs, such as:

• Increased cyber security risks: CBDCs could be more vulnerable to cyber attacks than traditional cash.
• Centralization of power: If CBDCs are widely adopted, they could give central banks too much power over the financial system.
• Deflationary effects: If CBDCs are too widely available, they could lead to deflation, which is a decrease in the general price level.

Central banks around the world are still exploring the potential benefits and risks of CBDCs. Some countries, such as China, are already piloting CBDCs, while others, such as the United States, are still in the early stages of research. It is likely that CBDCs will become more common in the future, but it is still too early to say what their ultimate impact will be.

Here are some examples of CBDCs that are currently being developed or piloted:

• The Sand Dollar, issued by the Central Bank of the Bahamas.
• The Digital Yuan, issued by the People’s Bank of China.
• The Digital Euro, being developed by the European Central Bank.
• The Digital Dollar, being studied by the United States Federal Reserve.

State Bank of Pakistan has also hinted towards it’s plan to work on a CBDC