CBDC (Central Bank Digital Currency)

A Central Bank Digital Currency is a digital form of a nation's official fiat money, issued and guaranteed by the central bank as state-regulated liability designed for broad use by citizens and institutions, unlike cryptocurrencies which operate independently of government control or traditional bank deposits which represent commercial bank liabilities.

CBDCs can be structured as retail CBDCs for consumers and merchants providing digital alternative to physical cash for everyday payments, or wholesale CBDCs for interbank settlement and cross-border payments between financial institutions. Objectives typically include improved payment efficiency through instant settlement, financial inclusion by providing access to digital money for unbanked populations, real-time monetary policy enforcement through programmable money, reduced costs of physical cash infrastructure, and maintenance of monetary sovereignty amid rise of private cryptocurrencies and stablecoins.

As of 2025, over 130 countries are exploring or deploying CBDCs at various stages from research through pilot programs to full implementation. Operational CBDCs include Bahamas Sand Dollar, Nigeria e-Naira, and Jamaica Jam-Dex, while major economies including China, EU, UK, Brazil, and India are conducting advanced pilots. Design considerations include privacy protection versus law enforcement access, offline payment capability, interest-bearing versus non-interest-bearing, direct central bank accounts versus intermediated through commercial banks, and programmability enabling smart contract functionality. Concerns include potential for government surveillance through transaction monitoring, disintermediation of commercial banking if deposits shift to central bank, cybersecurity risks from centralized attack surface, and implications for monetary policy transmission and financial stability during crises.