This article in last week’s issue of The Economist is a decent overview of central bank digital currencies, or governments issuing their own cryptocurrency.
According to the article, the main difference between these and the cashless payment systems we already use, like prepaid wallets, is “money held on a CBDC app or website will be equivalent to a deposit at the central bank”.
Similarly, the article predicts, such money held in private payment/wallet apps will still be equivalent to being held at the bank, not on the payment providers’ balance sheet. This is unlike today, where adding money into an Amazon Pay prepaid wallet is no longer on your banks’ balance sheet, it’s on whatever Amazon subsidiary holds the prepaid wallet license.
To be clear, none of these central bank digital currencies are really on ‘public’ blockchains, even though governments may piggyback on the term since it’s usually associated with them. They’re centralised, in that while their architecture may nominally resemble decentralised one like, say, the Ethereum blockchain, there’s almost certainly going to be tight control over who can run nodes.
Finally, I was disappointed that the article made only one passing reference to the programmable nature of digital currency, something that is widely done in crypto projects today’s using “smart contracts”, often the most innovative part of such projects. But back in September 2020, we had explored this topic in more detail: