## State Digital Payment Instruments: Development and Application

Many countries are actively working on the creation and implementation of payment systems issued by national central banks. These government digital instruments are already functioning in certain regions and are gradually becoming a reality in the global financial system.

## What is a central bank digital currency?

The state digital currency (CBDC) is an official means of payment in digital format issued by the sovereign central bank of each country. Although such currencies are similar in structure to cryptocurrencies, their value is set and guaranteed by the central bank, remaining equivalent to the traditional national currency.

## Main Goals and Advantages of CBDC

The main purpose of state digital currencies is to provide organizations and individuals with reliable data protection, the ability to conveniently carry out financial transactions, ensure accessibility, and guarantee the financial security of payments.

The introduction of digital currency can significantly reduce the costs of operating traditional financial structures and simplify the process of international payments. This provides users with a more attractive way to make money transfers and financial transactions.

## Classification: wholesale and retail varieties

As of today, there are two main categories of state digital payment instruments that differ in terms of target audience and scale of use.

**Wholesale systems** are designed for the operation of financial organizations. They serve as a tool for managing monetary resources and simplifying interbank settlements, allowing credit institutions to hold their funds directly in the central bank's vaults. This architecture enables banks to apply monetary policy tools to regulate lending rates and influence interest rates in the economy.

**Retail options** are designed for a wide range of users — both for commercial entities and ordinary citizens. They guarantee a state-backed means of payment that minimizes the risks associated with the use of private payment systems, including the risk of bankruptcy of their issuers.

Retail CBDC can be implemented in two ways. The first option is a **token-oriented model**, functioning similarly to physical cash. The second option is an **account-based model**, which requires the verification of participants' personal data when conducting any transactions.

## Solving Critical Problems of the Financial System

Central bank digital currencies help address many existing issues in the modern financial world. They eliminate the risks of intermediaries during critical situations, such as mass simultaneous withdrawals of deposits by customers from banks.

The introduction of CBDC also helps reduce the costs of organizing cross-border payments. Furthermore, digital currencies provide access to financial services for the population without traditional bank accounts, while allowing governments to avoid the need to create expensive banking infrastructures on their territory.