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- Payments have gone through significant innovation in recent history. Each time innovation has improved the convenience, speed, and security of money. Let’s review these money milestones.

Barter to Coins; An early form of payment was to trade goods as payment for needed goods. The difficulties were equal measure of value, physical size, and transportation. Precious metals were made into coins innovating the ease of payment to an agreed value assigned to the coin used.

Coins to Banknotes; In the late 1600s, banknotes were introduced changing the financial system forever. The convenience of banknotes provided the ability to move large values more easily. This started the move of currencies without true backing of value. The system changed to faith in the issuer at times companies and governments to mainly governments.

Banknotes to Cards; In the late 1950’s credit cards were introduced and became a new form of payment without physical money. Debit cards gave access to your bank account at any time and full-time access to your money although with bank restrictions. Credit and Debit cards are now the primary form of payment with plastic displacing physical money.

Cards to Crypto; Cryptocurrencies brought us a decoupling of the bank middleman for controlling our wealth. Starting with Bitcoin, cryptocurrencies provide the ability to exchange, pay and receive value without banks. This is the beginning of newfound financial freedom. Value you own secured by Blockchain technology.

Crypto to CBDC; Fast forward to today, and another monumental change is expected to occur through central bank digital currencies (CBDC). A CBDC adopts certain characteristics of everyday banknotes, plastic cards, and cryptocurrency. It is expected to provide central banks and the monetary systems they govern a modernizing move.

Let’s better understand the characteristics of money and how the next step of CBDC fits in.

  • Availability: The accessibility of money is a big factor. Cash and general purpose CBDCs can be considered widely accessible.
  • Mode: Physical or digital forms of money determines distribution and the potential for dilution. In the future, CBDCs will be issued completely digital.
  • Issuer: CBDCs will be issued by central banks and backed by their respective governments, making it different than cryptocurrencies which generally have no government affiliations.
  • Technology: CBDCs will have two approaches, a token-based and an account-based. CBDC token-based is like banknotes which do not need your information when transacting. In the account-based system authorization is needed to transact within the network like using a digital wallet or plastic card.

 CBDC are the electronic form of banknotes that we use today. It can be seen as an advanced and efficient edition of cash we use today. Cryptocurrencies act as a store of value that is secured by encryption. Cryptocurrencies are privately owned and based on blockchain technology. CBDCs will not necessarily make use of blockchain decentralized ledgers. Digital currencies by a central bank are backed by the full power of a government. Central Banks need to have the have legal authority to issue a CBDC and the laws enacted to allow for it.

The benefits of a CBDC for the financial system are several. Payments will move efficiently between parties at reduced transaction fees. These benefits extend to those in the population who are unbanked and, in reality, do not need banks. What they need is a quick, efficient, and inexpensive way to pay and get paid. CBDCs can open global access into the financial system without a bank.

CBDC benefits include:

  • Increased safety, and efficiency
  • Consumer protection and insurance
  • Stability of financial policy
  • Currency deployment and availability
  • Greater limits and visibility into financial crime prevention
  • Money-laundering and tax evasion exposure
  • Better identity security for fraud reduction
  • Direct relationship with citizens and residents

 The adoption of CBDCs is still in the future. Countries today are researching, experimenting, developing, and testing CBCDs for eventual roll-outs. In particular, the Bahama Island’s Bahamian Sand Dollar has already been deployed. Sweden, Uruguay, and China are in tests, with China most likely to soon launch their e-CNY backed by the PBOC.

Financial changes are already visible through the rising market value of fintech firms beyond traditional financial institutions. The rapid rise of Bitcoin and other cryptocurrencies of their market caps has happened in the shortest amount of time of any asset class. Central bank digital currencies are around the corner and is the beginning of the next financial systems disruption. Look at the recent changes within the financial system, disruption has benefited the individual directly more than at any other time in history.



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Chris Principe

Chris Principe


APB, Inc.

Member since

15 Nov 2008



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