Home Payday loans app PYMNTS Cryptocurrency Glossary: ​​Central Bank Digital Currency

PYMNTS Cryptocurrency Glossary: ​​Central Bank Digital Currency

0

Cryptocurrency is a confusing business with a language all its own, partly because it’s a genuinely new way of doing business and partly because it was created largely by programmers and cryptographers, who should never be allowed to name anything. use.

Cryptocurrencies have many uses as an investment, as a currency of payment, as a store of value, as well as others. As with any investment, it is essential to know what you are talking about and, more importantly, to know what the person trying to sell you something is really saying. And like any other area of ​​finance, industry, art, or basically any human endeavor, it has its own jargon, acronyms, and definitions.

See also: Dai or Die: ‘Payment Stablecoins’ and Why Crypto Taxonomy Matters

In this series of articles, we are creating a number of glossaries for various parts of the crypto industry, which we will combine into a larger reference tool. Today we are talking about Central Bank Digital Currencies (CBDCs), many of which are or likely will be built on blockchain technology. Over the past three years, CBDCs, like a digital dollar, have gone from something few people have heard of to national necessities. More than 100 countries are studying, planning or developing CBDCs.

Read more: PYMNTS Cryptocurrency Glossary: ​​The Basics

PYMNTS Cryptocurrency Glossary: ​​Regulation, Legislation and Crime

Glossary of PYMNTS Cryptocurrencies: Decentralized Finance or DeFi

Glossary of cryptocurrencies PYMNTS: Stablecoins

To access: In this context, this means access for individuals and businesses to payment services and to the broader financial infrastructure.

Anti-Money Laundering (AML): See the PYMNTS Cryptocurrency Glossary: ​​Regulations, Legislation and Crime

Central bank: A national institution that manages and controls the production and distribution of banknotes, digital currency and credit, formulates monetary policy and sets the amount of money in circulation. It sets interest rates and acts as a bank for commercial banks and as a lender of last resort.

Responsibility of the Central Bank: Paper money and money on deposit for commercial banks – reserves – are liabilities of the central bank. The Federal Reserve also lists reverse repurchase agreements, U.S. Treasury deposits, “foreign official” deposits, and “other deposits.”

Clearing: the process of settling transactions between banks and other organizations and financial institutions.

Counter Terrorist Financing (CFT): See the PYMNTS Cryptocurrency Glossary: ​​Regulations, Legislation and Crime

Commercial bank: Institutions that provide financial services and loan facilities to the general public and businesses.

Anonymity checked: The Bank of China’s expression for the degree of privacy it will actually provide to digital yuan users when reviewing the very substantial data it collects from these transactions.

Digital Currency Electronic Payment (DCEP): Official name of the Chinese digital yuan. Also known as e-CNY.

Digital dollars: A hypothetical US CBDC that is being investigated by the Federal Reserve, Treasury Department and others.

Digital euro: The CBDC envisaged by the EU.

Numerical Yuan: Chinese CBDC almost ready to launch. Formally the e-CNY, DCEP or digital renminbi.

Direct access: Access to a retail CBDC for which the central bank manages onboarding, distribution and settlement services directly to end users rather than through commercial financial institutions.

Disintermediation: refers to a CBDC in which central banks provide direct access to off-the-peg consumers and commercial banks. That would be a disaster, banks say, because they would have fewer deposits to turn into loans, worsening financial downturns – while people would be more likely to put funds in central bank-issued CBDCs, which cannot fail. .

Read more: Apogee or end of the world? Regulators and banks at odds over CBDCs

Distributed Ledger Technology (DLT): The technology on which blockchains are built. Some studies have suggested that certain distributed ledger technologies would be better platforms for CBDCs than blockchains.

See also: Boston Fed and MIT digital dollar test cast doubt on blockchain as a processing platform

Federal Reserve: The US central bank.

FedNow: The Federal Reserve’s real-time payment solution.

Financial inclusion: One of the main stated reasons for CBDCs, especially in developing countries, is to draw more unbanked and underbanked people (see below) into the financial system.

Individual holding limit: The European Central Bank (ECB) defines this as the maximum amount of digital euros (or other retail CBDCs) a person is allowed to hold. These limits are low – a few thousand euros at most – to avoid banking disintermediation.

Interoperability: A very big discussion in the design of CBDCs is how to make them usable for settling cross-border transactions while only functioning within their own systems. This is an important but difficult question on which the Bank for International Settlements has focused.

Legal tender: A means of payment such as currency that must be accepted at full face value to settle a public or private transaction.

Lender of last resort: Central banks play this role by offering loans to support banks in difficulty or on the verge of collapse.

Offline payment: A payment settled between a payer and a payee without the need for internet or other access. Making this happen is an important and challenging part of CBDC design.

Blockchain allowed: A privately controlled blockchain that does not allow anyone to become a node operator or use its tokens.

Read more: Crypto Basics Series: What is a permissioned blockchain and how does centralized decentralization work?

Privacy: In this context, it means how well a CBDC will protect user privacy. As AML requirements mean they cannot be completely private, a compromise is needed. But the amount of data a government could glean from a CBDC not designed to limit this is enormous.

QR Code: Scannable, square, and dot-matrix-style quick response codes are used in China to allow merchants to easily and cheaply connect to the digital yuan. It could also play a role in offline CBDC payments.

Real-time payments: A payment that is settled instantly. This can be a problem with cryptocurrencies issued on blockchains, which require multiple blocks to be added after a block before settlement is finalized.

Read more: Crypto Basics Series: What is a Blockchain and how does it work?

TCH Real Time Payments: The Clearinghouse’s Real Time Payments Network is a commercial real-time payment settlement network.

Sand dollars: The Bahamas has issued the first true central bank digital currency, the Sand Dollar.

Rules: Settlement is the making of a payment transaction.

Purpose of the rules: When a party has transferred an asset or financial instrument to another party and that transfer becomes unconditional and irrevocable.

Stablecoins: a cryptocurrency token issued by the private sector and tied – usually one-to-one – to fiat currency. This is often maintained by maintaining an individual reserve of highly liquid fiat currency or treasury bills.

Retail CBDC: Central bank pledge issued in digital form to the general public for the purpose of making retail payments.

Unbanked: People without a bank account. Usually refers to very poor people who cannot access or afford a bank account and are therefore effectively excluded from the financial system. It’s a widespread problem in developing countries, but there are approximately seven million unbanked people in the United States.

Underbanked: People who have access to a checking account but need to use alternative financial services such as payday loans and check cashing services.

Wholesale CBDC: A CBDC issued not to the general public, but to banks and financial institutions for interbank settlement. A number of countries are exploring or planning wholesale CBDCs in addition to or instead of a retail CBDC.

For all the PYMNTS Crypto coverage, subscribe daily Crypto Newsletter.

——————————

NEW PYMNTS SURVEY FINDS 3 IN 4 CONSUMERS HAVING HIGH DEMAND FOR SUPER APPS

About: Results from PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed responses from 9,904 consumers in Australia, Germany, UK and USA. and showed strong demand for one super multi-functional app rather than using dozens of individual apps.