Central Bank Digital Currencies (CBDCs)
have moved from being merely theoretical concepts to a stage when dozens of
countries throughout the world are actively testing them in various pilot
schemes. Designed as a government-backed digital version of fiat money, CBDCs
combine the trust of centralised monetary systems with the flexibility of
digital payments. Unlike cryptocurrencies, which fluctuate based on market
sentiment and are often decentralised, CBDCs are state-issued, pegged to
national currencies, and intended to offer price stability and legal
certainty—features that make them particularly relevant in a time of growing
demand for secure digital payment systems.
According to recent data, over 130
countries representing 98% of global GDP are now exploring CBDCs in some form,
including pilots, development, or research (albeit few have fully adopted
them). This rise reflects both technological momentum and regulatory intent to
reclaim control over digital currency ecosystems, especially as private
stablecoins and decentralised crypto assets have proliferated.
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Source: https://cbdctracker.org/
What sets CBDCs apart
from cryptocurrencies
Stability and trust
While cryptocurrencies like Bitcoin or
Ethereum operate in highly volatile and speculative environments, CBDCs are
anchored to fiat currencies and issued by central banks. This offers higher
value stability and institutional backing, reducing the risk profile for users.
Design and oversight
CBDCs are programmable but centrally
managed. Governments can impose compliance measures and offer consumer
protection in ways decentralised crypto systems cannot. Moreover, unlike crypto
assets, CBDCs are not mined or privately issued, ensuring state control over
monetary supply and transaction oversight.
Kar Yong Ang, financial market analyst at
Octa, notes: ‘CBDCs offer a new model of
digital liquidity—blending state trust and legal tender with tech efficiency.
For traders, this opens doors to a more secure and transparent digital finance
ecosystem.’
Why are central banks
racing to develop CBDCs?
Here are three key reasons why central banks
invest resources in CBDSs:
●The decline of cash and rise of digital payments. As societies increasingly favour digital over physical money, central
banks face pressure to modernise public currency formats. In Sweden, for
example, cash transactions make up less than 10% of payments. CBDCs are seen as a
public alternative to private payment apps and platforms, ensuring monetary
sovereignty in the digital realm.
●Controlling private stablecoin risks. Private
stablecoins like USDT and USDC have raised concerns over systemic risk and
shadow banking practices. A CBDC can serve as a stable counterbalance to these
instruments, offering liquidity and legal clarity in fast-evolving financial
markets.
●Financial inclusion and transparency. CBDCs
can increase financial inclusion by offering digital wallets to unbanked
populations, especially in developing economies. They also offer governments
more visibility into money flows, enhancing tax collection and curbing illicit
finance—though this has sparked debate around surveillance and
privacy.
Pros and cons of CBDCs
CBDCs offer notable advantages: their
value is typically pegged to fiat currencies, ensuring greater price stability
than most cryptocurrencies. With full state backing, they function as legal
tender and may include programmable features like conditional payments. For
underbanked populations, they also present a path toward improved financial
access.
However, concerns remain. Privacy is a
major issue, as CBDCs could give governments visibility into personal
transactions. They also pose cybersecurity risks, potentially becoming targets
for large-scale attacks. Moreover, they could interfere with traditional
monetary policy and financial market dynamics if not carefully designed. For
instance, commercial banks could experience deposit runs if individuals
perceive CBDCs as a safer alternative to traditional money for savings.
Real-world cases
Although the majority of countries still
research CBDC and their application in the economy, some have already
implemented them.
●Bahamas. The Sand Dollar became the first nationwide CBDC in 2020. It now serves
all islands through a network of mobile-based wallets.
●Nigeria. The eNaira, launched in 2021, has
seen a slow adoption of less than 0.5% as of 2025. The government
continues to offer incentives to boost usage.
●China. The e-CNY has been piloted in over 25
cities and integrated into public transit and e-commerce
platforms. Its scale makes it the most advanced major-economy CBDC.
Looking ahead: the road to adoption
While CBDCs promise greater efficiency and offer more
tools for governments to implement social objectives, they also pose new governance
challenges. To thrive, states will have to balance innovation with civil liberties,
infrastructure resilience, and global interoperability. As the world of digital currencies continues to develop, CBDCs are increasingly important
for progressive
traders to grasp. Keeping up with developments can give a vital advantage in understanding the future of money.
Trading involves risks
and may not be suitable for all investors. Use your expertise wisely and
evaluate all associated risks before making an investment decision.
Octa is an international broker that has been providing online
trading services worldwide since 2011. It offers commission-free access to
financial markets and various services used by clients from 180 countries who
have opened more than 52 million trading accounts. To help its clients reach
their investment goals, Octa offers free educational webinars, articles, and
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