Central bank digital currency (CBDC) is a digital currency backed by a country's government they are considered legal tender for local and international transactions, the quest for a cashless policy system to provide widely distributed financial services for local and Urban users to have accessibility to a robust finance banking system is one of the aims behind the idea of CBDCs, Central banks around the world are unveiling digital currencies that will be used to boost business interaction between users in different countries.
CBDCs other aims are to
Improving user's banking experience.
Simplifying monetary policy.
Be a centralized accepted legal tender digital currency backed by governments.
Resilient against cybercrime.
What's happening behind the scene
With cryptocurrencies continuing to thrive despite unfavorable regulatory policies limiting enormous adoption of users diving into the crypto space due to fear of uncertainty and doubt about crypto regulations, CBDCs are introduced to compete with decentralized currencies they are the opposite of what decentralization is built on.
Privacy problem
CBDCS; as cool as this digital currency are, they will have monopoly over users transactions, lack of privacy in transaction will be a limitations around this centralized currency, unlike decentralized currencies that gives users anonymity CBDCS offers quite the opposite to users.
Circulation problem
Bitcoin will have a capped 21 million supply this will be a hedge against inflation, CBDCS will be like the normal fiat cash that has unlimited supply which will only increase circulation of fiat currencies in general it's does not provide solution for current inflation problem today.
Introducing a centralized digital payment system that will easy users means of interacting with local banks is a good initiative, only problem here is what are the core motives behind CBDCs are they here to limit the adoption of decentralized currencies or they will they be the real cryptocurrencies killer?
Seems we will still be in the same old circle with CBDCS around there's no guarantee we will having our assets to ourselves without been monitored on every penny is spent.