Central bank digital currencies (CBDCs) are digital currencies issued by central banks. They represent a digital version of traditional currency (such as the euro or dinar) and are backed by reserves held by central banks, giving them stability guaranteed by the state. Unlike cryptocurrencies such as Bitcoin, CBDCs are centralized and controlled by a government authority.

CBDCs aim to:

- Facilitate digital payments by making transactions faster and more secure.

- Promote financial inclusion, by offering an alternative to traditional banking systems for people who do not have bank accounts.

- Reduce the use of cash, while preserving the monetary sovereignty of the state.

Examples of such currencies include the digital yuan** in China, and the European Central Bank, which is exploring the possibility of launching a **digital euro**.