The digital age has clearly arrived, and the money as we know it is undergoing a digital transformation just like everything else.

Digital payments have become globally ubiquitous with the advent of mobile phone-based apps that facilitate spending and banking. CBDC, or central bank digital currency, is partially designed to defend against encroachment on sovereign money by cryptocurrencies like Bitcoin.

On the surface, CBDC is simply a digital form of the currency issued by central banks and a bigger leap towards a cashless world. Nonetheless, its profound implications might extend beyond the realm of a specifci country’s banking system.

Generally, the two main types of CBDC are wholesale, which is only available to commercial banks, and retail, which is available to all. A CDBC payment system doesn’t require physical infrastructure, and its efficiency, low cost, and ease of use benefti consumers and businesses alike.

The appeal of this technology is greater in countries where per capita incomes are low, transactions are small, and physical bank branches are few. The concept greatly improves fniancial inclusion, as evidenced by the early movers like theBahamas, Nigeria, and Cambodia, where millions of unbanked and underbanked are fniding new access to fniancial services.

It is intriguing that emerging market economies are leading the way in the sphere of CBDC, as the transformative potential and the beneftis that accrue from these changes are far greater in developing economies than in richer ones with more sophisticated fniancial systems.

If the concept creeps beyond national borders as many have envisioned, an interlinked CBDC system could eventually challenge the dominance of the U.S. dollar in the global fniancial regime. Bakong is known for promoting usage of the Cambodian riel over the U.S. dollar, which still dominates transactions in Cambodia. The EU’s plans to strengthen the euro over the dollar include creation of a digital euro. China’s efforts over the years to globalize its currency have made even more global headlines than the EU’s. The quick rise of the digital yuan has undoubtedly added fuel to speculation over the yuan’s ability to rival the dollar.

CBDC is still early in its development. Most countries are only starting to explore the idea. Yet clear signs are emerging that CBDCs will reshape the current fniancial landscape, mostly likely in a fundamental way.