Bitcoin’s growing popularity, the digitization of payment systems, and the demand for stablecoins have prompted countries to explore central bank digital currencies (CBDCs). While CBDCs are sometimes viewed as synonymous to, or as replacements for, digital currencies like Bitcoin, they represent a meaningful departure from the decentralized protocols inherent to many cryptocurrencies. If CBDCs gain traction, they may actually bolster the value proposition of Bitcoin and other digital currencies. This report unpacks what CBDCs are, how they would work, and what the implications are for investors.

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