CBDC Glossary

Below are definitions of some of the terms most commonly used to describe CBDCs and related policy, design and technologies.

Please acknowledge Reconnaissance International when using this glossary.


CBDCs are held by the public at the central bank in individual bank accounts. See also token-based.
Algorithmic stablecoins
These stablecoins adjust supply using algorithms to maintain price stability. An example of this is Nubits. Algorithmic stablecoins are maintained by systems of smart contracts that operate exclusively on a public blockchain. See governance token.
Algorithmic stablecoins
These stablecoins adjust supply using algorithms to maintain price stability. An example of this is Nubits
Anti-Money Laundering (AML)
Many jurisdictions have established regulations and set up sophisticated financial and other monitoring systems to enable law enforcement agencies to uncover illegally obtained funds and detect suspicious transactions or activities. International cooperation arrangements have been set up to assist these endeavours. Many anti-money laundering laws combine money laundering (which is concerned with the source of funds) with terrorism financing (which is concerned with the destination of funds) when regulating the financial system. The Financial Action Task Force (FATF) is the lead internationally on this issue with a useful website providing detailed information.
Anti-Terror Financing legislation
See Counter Terrorism Financing.
Software on a mobile device used to link the holder to a specific web page/service.
Application Programming Interface (API)
A connection between computers or between computer programs. It is a type of software interface, offering a service to other pieces of software. A document or standard that describes how to build such a connection or interface is called an API specification. A computer system that meets this standard is said to implement or expose an API. The term API may refer either to the specification or to the implementation.
Asset-backed stablecoins
The asset could be money (central bank reserves, banknotes or bank deposits), commodities (eg. gold), or other cryptocurrencies. Since stablecoins are not covered by deposit insurance and central banks do not act as lender of last resort for them, to have confidence in them they need to be fully backed. The type of asset and the legal rights of the holder are key to whether there is confidence in the stablecoin, although, ultimately, simple confidence or belief is also a significant factor in whether they are stable or not. The profitability of the asset to the provider and their own funding model is a part of assessing the stablecoin.


Bank for International Settlements (BIS)
The Bank for International Settlements is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks".
Bearer instrument
No ownership information is recorded, and the security is issued in physical form to the purchaser. The holder of a bearer instrument is presumed to be the owner, and whoever is in possession of the physical bond is entitled to the coupon payments.
Bitcoin is commonly said to be a cryptocurrency, a digital means of exchange developed by a set of anonymous authors under the pseudonym of Satoshi Nakamoto, which began operating in 2009 as a community project (Wikipedia type), without the relationship or dependency of any government, state, company or body, and whose value (formed by a complicated system of mathematical algorithms and cryptography) is not supported by any central bank or authority. Bitcoins are essentially accounting entries in a large database called a blockchain, which is unique but replicated in millions of computers connected to the internet. Bitcoins can be exchanged almost instantaneously for any currency and can be used for payment. The system has numerous pros and cons, and many central banks insist that bitcoin is not a currency but a highly speculative and high-risk asset. In reality it is reasonably quick and easy to buy cryptocurrencies but the exchanges make it harder and costlier to sell them.
A cryptographic database maintained by a network of computers, each of which stores a copy of the most up-to-date version.
Blockchain protocol
Rules that dictate how computers in the network verify new transactions and add them to the database.


CBDC (Central Bank Digital Currency)
A digital payment instrument, denominated in the national unit of account, and a direct liability of the central bank. See retail, wholesale and synthetic CBDCs.
CBDC - retail or general purpose
A CBDC made available to the public. A general purpose CBDC can be used by the public or institutions.
CBDC - synthetic
Accounts are not on the balance sheet of the central bank. Intermediaries hold the liability but are required to deposit 100% of the customers’ accounts at the central bank. These are not usually regarded as true CBDCs.
CBDC - wholesale
A wholesale CBDC is a CBDC issued and used for interbank settlements. It is not available to the public, only to financial institutions who are part of the central bank settlement system.
Central bank (Reserve bank or Monetary Authority)
Institution that manages the currency and operates the monetary policy of a state or monetary union. Central banks can also be tasked with supervising commercial banking systems. Central banks in most developed nations are institutionally independent from political interference.
Central bank and monetary authority
An institution that manages the currency and monetary policy of a state or formal monetary union, and oversees their commercial banking system.
Central Bank Digital Currency (CBDC)
A digital payment instrument, denominated in the national unit of account, and a direct liability of the central bank. See retail, wholesale and synthetic CBDCs.
Central bank law
Central bank law is used to establish the Central Bank, provide for its decisionmaking body, lay foundations for its autonomy and prescribe its mandate.
Central bank money
A liability of a central bank, including banknotes in circulation and banks’ deposits with the central bank.
Centralised ledger system
A ledger, a record of financial transactions, kept in one place. Often as part of a closed system, ie. with limited and controlled access, to help safeguard the ledger from unauthorised access. RTGS systems are, typically, centralised.
Commercial bank
A financial institution which accepts deposits from the public and gives loans for the purposes of consumption and investment to make profit. It can also refer to a bank, or a division of a large bank, which deals with corporations or large/middle-sized business to differentiate it from a retail bank and an investment bank. Commercial banks include private sector banks and public sector banks.
Composability of services
In the context of stablecoins built on DLT standards, the ability to act as self-contained building blocks that interoperate with self-executing programmable contracts (smart contracts) to create payments and other financial services.
Counter Terrorism Financing (CFT)
Laws and regulations designed to stop the financing of terrorism.
Crypto exchange
A place where crypto currencies are bought and sold.
A number generated by an algorithm which is then recorded in a distributed ledger linked to a digital key held by the owner. Cryptocurrencies are not issued by a government and are not backed by assets. Their value lies in their scarcity, the numbers created are limited.
The official means of payment of a state/monetary union recognised as such by ‘monetary’ laws.
Custodial stablecoins
Reserve-backed stablecoins. Stablecoins which are issued by intermediaries who serve as custodians of cash-equivalent assets and offer 1-for-1 redemption of their stablecoin liabilities for U.S. dollars or other fiat currencies. See also algorithmic stablecoins.
Crime committed to steal or defraud people of electronic money, or crypto-assets, online.


Decentralised Finance (DeFi)
A blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments. DeFi refers to a system by which software written on blockchains makes it possible for buyers, sellers, lenders, and borrowers to interact peer to peer or with a strictly software-based middleman rather than a company or institution facilitating a transaction.
Decentralised ledger system
If the ledger that records transactions and holdings is held in multiple places, and the ledgers are simultaneously updated, then the system is decentralised. See Distributed Ledger Technology for a description of the technical infrastructure on which distributed ledger systems can be based.
Diem (see Libra)
A permissioned blockchain-based payment system proposed by the American social media company Facebook, Inc. The plan also includes a private currency implemented as a cryptocurrency.
Digital asset
Anything that exists in binary data which is self-contained, uniquely identifiable, and has a value or ability to use.
Digital Currency Electronic Payment (DCEP)
Name of China's CBDC. See also e-yuan and e-CNY.
Digital Dollar
Informal term for a US CBDC.
Digital Euro
Informal term for a European CBDC.
This term isn't just connected to or the result of introducing CBDCs. All fintech activity has been said to risk disintermediation of the banks by moving activity out of the banking sector and into the non-bank or fintech sector. The term really refers to the efforts to remove intermediaries and connect participants in a transaction directly. So the term applies much more broadly than implied than just to CBDCs. In terms of CBDCs, if the public is able to have an account and hold CBDC funds at a central bank, then there is less or even no need for the public to hold private money in a commercial bank account. If this happens, the services of the commercial bank account have been disintermediated.
Distributed Ledger Technology (DLT)
Technological infrastructure and protocols that allows simultaneous access, validation, and record updating in an immutable manner across a network spread across multiple entities or locations.
Double spending
Double spending is a potential risk in a digital cash scheme in which the same single digital token can be spent more than once. Unlike physical cash, a digital token consists of a digital file that can be duplicated or falsified.


e-yuan / e-CNY
Unit of exchange used in China's DCEP system.
Ethereum / Ether
Ether is the name of a popular cryptocurrency which operates on the Ethereum network.
Exchanges, Cryptocurrency
Websites where people buy, trade and hold crypto currencies.


Fiat currency
A currency established as money, often by government regulation, without an intrinsic value, unlike a precious metal or a merchandise. It was a development step from the use of a commodity money.
Financial Institution (FI)
A company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange.
Fork, Cryptocurrency network
Where a second version of a database is created.
A good is fungible if one unit of the good is equivalent to another unit of the same good of the same quality at the same time, place, etc. Fungibility allows a good or asset to be interchanged with other individual goods or assets of the same type. Fungible assets simplify the exchange and trade processes, as fungibility implies equal value between the assets.


Governance token
For public algorithmic stablecoins, the ability to control contracts is often conferred by the possession of a governance token, a specialised token primarily used for voting on changes to protocol or governance parameters. These governance tokens can also potentially serve as direct or indirect claim on future cash flows from the usage of a stablecoin’s protocols.


Hybrid or intermediate CBDC
An account at the central bank with private intermediaries handling retail payments and, possibly, opening accounts. The difference between hybrid and intermediate CBDCs is whether the central bank keeps a central ledger of all transactions.


Interbank settlement
The balancing off of bank funds held at the central bank at a given agreed moment at the end of a trading period. If Bank A's customers have transferred more money to Bank B than Bank B's customers have transferred to Bank A, then Bank A needs to transfer appropriate funds to even out the balance.
International Standards Organisation (ISO)
An independent, non-governmental international organisation with a membership of 165 national standards bodies. Through its members, ISO brings together experts to share knowledge and develop voluntary, consensus-based, market-relevant international standards that support innovation and provide solutions to global challenges.
The ability of different information systems, devices and applications to access, exchange, integrate and cooperatively use data in a coordinated manner, within and across organisational, regional and national boundaries.


Keys (private and public)
See Lock and key
Know Your Customer (KYC)
Refers to the information that the local regulator requires payment service providers (PSPs) to collect about any potential new customer in order to discourage financial products being used for money laundering or other crimes. Some countries allow FSPs greater flexibility than others as to the source of this information.


Legal tender
Money that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt.
Lender of last resort
Central banks usually fulfil the function of 'lender of last resort'. To ensure financial stability, the central bank provides emergency credit to financial institutions that are struggling financially and near collapse, for example if they no longer have other available means of borrowing, and where their failure to obtain credit would dramatically affect the economy. An example of when this is needed is if bank account holders withdraw funds at a level and in a timespan which means the bank cannot liquidate assets fast enough to match the demand creating what is known as a 'run on the bank'.
The original name for what is now Diem.


Monetary law
Monetary law is the legislative and regulatory framework that provides the legal foundations for the use of monetary value in society, the economy and the legal system.
There is no universally accepted legal definition. Currency is usually regarded as money. It often includes other assets or instruments that are readily convertible or redeemable into currency, eg. ‘book money’ - credit balances on account.
Money as a memory
The ability to keep full digital ledgers of transactions increasingly makes it feasible for agents to have a full record of their interactions with other agents in the past – or money as memory.
Money laundering
The operation of attempting to disguise a set of fraudulently or criminally obtained funds as legal, in operations undeclared to tax authorities, and therefore not subjected to taxation. Money laundering activities are strongly pursued by authorities and in most countries, there are strict rules for credit institutions to cooperate in the fight against money laundering operations, to declare and report any transactions that could be considered suspicious.


National Central Bank (NCB)
In general, the expression refers to the central banks of different countries.
Near-field communication (NFC)
A method of wireless data transfer between two electronic devices over a distance of 4cm or less.
Negative interest rate
When the nominal interest rate drops below zero percent for a specific economic zone. This effectively means that banks and other financial firms have to pay to keep their excess reserves stored at the central bank, rather than receiving positive interest income. This is hard to enforce while people have the option to hold funds in other assets, particularly physical cash.
Network effect
A phenomenon whereby a product or service gains additional value as more people use it.
Nodes, Cryptocurrency network
Computers in the network.
Non-fungible Token
‘Non-fungible’ means that the token cannot be substituted. What it represents is unique, unlike money or a bitcoin. See 'Token'.


P2P (Person-to-person)
Where the interaction is directly between two individuals.
Payment instruments
Documents that can be used legally to effect payment in commercial banks in book money or currency. For example, cheques, bills of exchange, promissory notes.
Payment rail
A payment platform or a payment network that moves money from a payer to a payee. Either party could be a consumer or business, and both parties are able to move funds on the network. Credit card rails are the credit card payment system.
Payment Service Provider (PSP)
Traditional role has been to provides shops online services for accepting electronic payments by a variety of payment methods including credit card, bank-based payments such as direct debit, bank transfer, and real-time bank transfer based on online banking. Typically, a software as a service model and form a single payment gateway for their clients (merchants) to multiple payment methods. For CBDCs PSPs are likely to facilitate their acceptance and use for payments.
Peer to peer
Peer-to-peer computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the application. They are said to form a peer-to-peer network of nodes.
Permissioned blockchain
Decentralised settlement can be permissioned, you have to ‘ask’ to make a transaction and a record is kept. It also applies when you have to have permission to access the network or to operate a node in the network. You generally don't need to re-ask to make a transaction once you have permission to access the network.
Permissionless blockchain
Decentralised settlement can be permission-less, the transaction happens if requested. As with permissioned blockchain, this term also applies to how you gain access to the network or for how notes operate. As it says, with this approach permission is not required to get access.
Pilot project
A test run to see if an idea or approach will work.
Point-Of-Sale (POS) terminal
A device allowing the use of payment cards at a physical (not virtual) point of sale. The payment information is captured either manually on paper vouchers or by electronic means.
Precautionary holding
Banknote/CBDC demand motivated by the store of value function of banknotes, for saving purposes or as a precaution for uncertainties.
Privacy is about the protection of data. The question is to determine what data needs to be protected from whom. While cash offers a high level of payment privacy because little data is recorded about is use or existence, electronic payments do generate considerable quantities of data. As a result, the design of a CBDC needs to address the appropriate levels and safeguards to meet policy goals and public expectations.
Programmable money
People are trying now to differentiate between programmable money and programmable payments. Most often it's the payment that is programmable and not the money itself. The distinction is still being sorted out. When there is a programmable payment, there is the ability to apply a coded instruction automatically to a digital payment so that if set conditions are met, an action then happens. See also 'Smart contracts'.
Proof of concept project
A project used to demonstrate the feasibility, or a principle, of a concept or theory to see if it has practical potential. A proof of concept is usually small and may or may not be complete.
Proof of stake
This applies predominantly to blockchain, DLT cryptocurrency products. Proof of stake uses a deterministic algorithm based on the number of coins owned by a user. This algorithm offers the possibility for nodes to increase their chances of being elected to mine more coins and encourages coin owners to maintain the network because the choice is random. The more coins you own, the higher the chance of being chosen. See also 'proof of work'.
Proof of work
In proof of work solutions, transactions are secured through a linear trail of transaction history and the use of a computational puzzles (‘proof of work’ consensus algorithm) reflecting that work. This applies predominantly to blockchain, DLT cryptocurrency products. See also 'proof of stake'.
Proof of work/mining, Cryptocurrency
A protocol for verifying transactions. Nodes use their computing power to prove themselves sufficiently trustworthy to be allowed to add new information about transactions to the network.
Public-private partnership (PPP)
A cooperative arrangement between two or more public (ie. government) and private sectors.


QR (Quick Response) code
Two-dimensional matrix barcodes that can be used to identify URLs, so that smartphone users can photograph the code and retrieve information about its originator’s company or product. QR codes can store up to 4,296 alphanumeric or 7,089 numeric characters and are clearly distinguished from datamatrix barcodes by the four squares at each corner that are used for alignment.


Radio frequency identification (RFID) device
Small microchips containing unique and individual information related to the item on which the chip is attached. The chip, and therefore the information, is addressed by means of radio waves conveyed to the chip by an attached antenna. These devices are now so small that they can be neatly implanted into paper. They can typically be detected at distances ranging from a few millimetres to several metres.
Real Time Gross Settlement (RTGS)
A funds transfer system that allows you to transfer money or securities instantaneously. In most cases, RTGS is used for high-value interbank transactions that need to be cleared as soon as possible.
Real Time Payment (RTP)
Payment rails (platforms or networks via which payments are made) that share a few characteristics. The first is in the name: they are real-time, or at least very close initiating, clearing, and settling in a matter of seconds.
Money sent home from emigrants working abroad.
Request for Information (RFI)
A common business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes. An RFI is primarily used to gather information to help make a decision on what steps to take next. RFIs are therefore seldom the final stage and are instead often used in combination with a request for proposal (RFP) and request for quotation (RFQ).
Request for Proposal (RFP)
A document that solicits a proposal from suppliers, often as part of a bidding process, by an agency interested in procuring a commodity or service. An RFP is used when a general need or problem must be solved, and potential sellers are proposing solutions and how much they will cost. Companies evaluating an RFP must consider not only the cost but the effectiveness of the solution.
Request for Quotation (RFQ)
A document that solicits quotations from suppliers often as part of a bidding process, by an agency interested in procuring a commodity or service. An RFQ is used when a quote is needed for a specific need and solution.
Reserve asset
Reserve assets are financial assets denominated in foreign currencies and held by central banks that are primarily used to balance payments.
If payment rails fail, people can continue to pay using cash. One of the design decisions with CBDCs is whether to create a separate CBDC payment rail independent of existing systems or whether to run along existing systems. If the latter, how does a CBDC offer any additional resilience over and above existing systems.
Retail CBDC
A CBDC made available to the public.


Seigniorage (Seignorage)
Derived from the French expression seigneuriage, referring to the right of the lord (seigneur) to mint money. In connection with banknotes seigniorage refers to the interest earned by the central bank when investing the funds received via issuance of banknotes at face value, minus the cost of producing, distributing and replacing them.
Settlement of securities is a business process whereby securities or interests in securities are delivered, usually against (in simultaneous exchange for) payment of money, to fulfil contractual obligations, such as those arising under securities trades. Nowadays, settlement typically takes place in a central securities depository.
A cellular (or mobile) telephone with an integrated computer, camera, and other features not originally associated with a mobile phone.
A cryptocurrency that is backed by a reserve asset. The backing aims to provide confidence so that Stablecoins can be used for instant processing, offering security or privacy but without the volatility of cryptocurrencies such as Bitcoin.
Structured Query Language (SQL)
The standard language used to communicate with relational database management systems (ie. systems which store and provide access to data points that relate to one another). SQL statements are used to perform tasks such as updating and retrieving data.
Synthetic CBDC
Accounts are not on the balance sheet of the central bank. Intermediaries hold the liability but are required to deposit 100% of the customers’ accounts at the central bank. These are not usually regarded as true CBDCs.


The value of the CBDC is held as a token. The token can be stored in a number of places, an account, a wallet, a card etc. This term can be hard to define at a deeply technical level and some central banks are trying to get away from terms such as token- and account-based because those terms are so imprecise. One problem is there are many definitions, and they can be conflicting. For example, many now say the bitcoin is not really a token. You could clone the bitcoin system but have identities attached to all the addresses and nothing would change in the code. So, is that a token or an account? See also Account-based.
Tokens, tokenisation
A token is a representation of another object using a non-representative substitute. A sensitive data element, or valuable item, is represented with a non-sensitive/valuable equivalent, referred to as a token, that has no extrinsic or exploitable meaning or value, a token is created. The token is a reference (ie. identifier) that maps back to the sensitive data through a tokenization system.
Two-tiered CBDC
Two-tier means the CBDC are first distributed to banks who then distribute them to individual much as happens now with cash. At each stage the CBDC is still a liability of the central bank. The core ledger is held by the central bank, but the private sector acts as PSPs delivering accounts and services to the public.


People who do not have a bank account.
People who have a bank account but do not actively use it. For example they may be paid or receive a government benefit payment into the account, but they then withdraw it in cash and do not use the account further.
Universal Access Device (UAD)
Device designed to allow CBDCs to be held and used off-line. This could bey a card or a specialised device.


Wallet, digital
A digital wallet can be in the form of an app, card or UAD device. It is a place where electronic money is held in token form.
Wholesale CBDC
A wholesale CBDC is a CBDC issued and used for interbank settlements. It is not available to the public, only to financial institutions who are part of the central bank settlement system.

Please acknowledge Reconnaissance International when using this glossary.