## Why is CBDC Becoming a Priority for Central Banks Worldwide?

Central banks around the world are accelerating the advancement of digital currency development. This official digital payment tool directly issued by the central bank—referred to as Central Bank Digital Currency ( CBDC )—is moving from the theoretical stage to practical application. Unlike traditional crypto assets, the value of CBDC is anchored by the central bank and is equivalent to the national fiat currency, which determines its unique position in the financial system.

## What pain points of traditional finance does CBDC address?

The introduction of Central Bank Digital Currency (CBDC) is not accidental. It is designed to provide privacy protection, fast settlement, financial security, and ease of use for businesses and consumers. Most importantly, CBDC can significantly reduce the maintenance costs of complex financial systems, especially in cross-border transactions - which has been the most time-consuming and expensive link in international trade.

In addition, digital forms of Central Bank currency provide new financial access channels for the unbanked population, without the need to build expensive physical financial infrastructure. This is especially significant for developing countries.

## Two Operating Models of CBDC

**Wholesale CBDC** primarily serves financial institutions. Banks and other entities use it to maintain reserves at the Central Bank, manage liquidity, and perform clearing and settlement. The Central Bank can flexibly deploy monetary policy tools through this instrument to adjust borrowing costs and market interest rates.

**Retail CBDC** is aimed at businesses and individual consumers. This type of digital currency, provided by the central bank, offers a stable medium of exchange backed by the state, eliminating the default risk of private digital asset issuers. There are two technical routes for retail CBDC:

The operation logic of **token-based** CBDC is similar to cash—holders can transfer without identity verification. The **account-based** model, on the other hand, requires participants to complete identity verification, providing higher regulatory transparency.

## The Practical Significance of Digital Currency Central Banks

CBDC plays an important role in financial risk management. For example, in the event of a sudden large-scale cash withdrawal, the digital currency issued by the Central Bank can effectively isolate intermediary risks. The reduction in international payment costs has also made global trade more convenient.

This digital financial revolution reflects the Central Bank's rethinking of the future payment system—how to ensure financial stability and the authority of the Central Bank through technological innovation while providing users with a modern trading experience.