Consider the following statements regarding “Central Bank Digital Currency (CBDC)”:

I. Being a digital fiat currency, it cannot be transacted using wallets backed by blockchain.

II. Nigeria has been the first economy to launch its nationwide CBDC.

III. CBDCs are legal tenders issued and backed by a central bank.

Which of the statements given above is/are correct?

Solution

It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Statement I is not correct - The digital fiat currency or CBDC can be transacted using wallets backed by blockchain. Bahamas has been the first economy to launch its nationwide CBDC — Sand Dollar. Statement II is not correct - China became the world's first major economy to pilot a digital currency e-CNY in April 2020. Nigeria is another country to have rolled out eNaira in 2020. Statement III is correct - CBDCs are a digital form of a paper currency and unlike cryptocurrencies that operate in a regulatory vacuum, these are legal tenders issued and backed by a central bank.