CBDC stands for “Central Bank Digital Currency”, a novel currency type that governments on the world stage are exploring. CBDC’s are based on similar general principles that underlie traditional digital currencies such as Bitcoin (BTC) and Ethereum (ETH). Both rely on Distributed Ledger Technology (DLT), also known as the blockchain. Where they differ is in terms of centralization. As the name suggests, CBDC’s are digital currencies created and organized by central banking institutions. These currencies would be used as a replacement for fiat currency with a host of additional benefits. CBDC’s take advantage of the increased security features provided by the blockchain, however, they differ from traditional digital currencies by centralizing control rather than distributing control in a decentralized manner. This is done through what is known as a “permissioned blockchain”. A permissioned blockchain is composed of several copies of the ledger history, each stored and managed by separate financial entities. (Hertig, 2020) Since only a select few entities can access and/or alter the blockchain, this type of distributed ledger technology is considered ‘permissioned’. (Hertig, 2020) This is in contrast to permissionless blockchain technology, such as Bitcoin, where anyone can participate in sending transactions to the network and where no central entity can regulate. (Hertig, 2020)


The global financial industry has historically benefited those who have had access to traditional financial infrastructures such as banks and lending institutions. Although luxuries such as savings accounts and access to investment or debt are often taken for granted in developed nations, many individuals who reside in developing nations or environments with poor standards of living have found it difficult if not impossible to access these institutions, and this lack of access perpetuates these poor standards of living. The widespread proliferation of smartphones in the last decade has been a catalyst for the increased adoption of internet-based digital banking. The recent rise in cryptocurrency adoption has also been fueled by this uptick in global smartphone use since now individuals have access to global markets and can bypass the corrupt governments and underdeveloped financial institutions that restricted them.

With the exploration of CBDC’s, legitimized by national banks, individuals with lower socioeconomic status can have greater access to the perks of modern digitized banking services like convenience, security, and transparency. (Mcdonald, 2021) Furthermore, CBDC’s could lower the cost and friction of banking by eliminating fees and providing a more seamless way for immigrants to send remittances to their families and friends in other countries. Lev Menand, a lecturer and fellow at Columbia Law School states, Millions of people who currently can’t afford to be in the banking system and therefore are relegated to conducting economic activity in physical cash would be able to get online and participate in an internet-based economy more easily”. (Mcdonald, 2021) Additional benefits include the limiting of illicit activity, streamlining government monetary policy, and incentivizing companies to meet transparency standards with regard to accounting and finance. (Biyani et al., 2021)


Despite the wide variety of advantages that CDBC’s provide individuals, it’s not all sunshine and roses:

  • Like all things digital, CBDC’s could be the target of hacks and other forms of privacy breaches, both from third parties and adversarial governments alike. (Mcdonald, 2021)
  • With regard to implementation, a potential issue arises if citizens pull too much money out of banks at once to convert to CBDC’s which could lead to a bank runoff. (Biyani et al., 2021)
  • Regulatory processes are not updated to implement this new technology and must be made more robust before widespread adoption. Without new standards and international coordination, the financial system may face a significant currency exchange problem in the future. (Biyani et al., 2021)
  • Many who champion the decentralization that traditional cryptocurrencies pride themselves on view the centralization of CBDC’s as a negative factor that gives asymmetric influence to centralized figures. (Mcdonald, 2021)

It is still very early in the development lifecycle of CBDC’s but the number of countries experimenting with them has more than doubled in the last year, rising from 35 countries in May 2020 to over 80 as of July 2021, representing 90% of global GDP. (Biyani et al., 2021) Rather than taking a uniform approach, these counties are exploring varied strategies and implementing them at different speeds. (Mcdonald, 2021) Below are a few notable examples of countries that are well on their way to widespread adoption of digital currencies.


With their rollout of the digital Yuan in April 2020, China became the first major economy to pilot a digital currency. With the ability to exchange a physical note for an equivalent amount in its digital counterpart, China’s goal is to replace a large portion of its circulating supply with the digital Yuan. A Chinese central bank official claimed the digital Yuan has “controllable anonymity,” with protections in place to curb illegal activity like money laundering. (Mcdonald, 2021)

United States

The US has adopted a measured approach to CBDC’s likely because the US Dollar serves as the de facto international reserve currency making up more than 60% of global foreign exchange reserves. 

The United States is interested in implementing a digital currency and the FED will release its findings in September 2021. (Mcdonald, 2021)


With the largest economy in Africa, the central bank has been researching the “e-Naria” and in October 2021, the country will pilot the digital currency. Nigeria is the 10th largest remittance recipient in the world, relying on cross-border payments for $17 billion each year, or 4% of its GDP.  With a CBDC, expats will likely be able to send money back home with lower fees. (Mcdonald, 2021)  

European Union

The European Central Bank President Christine Lagarde stated in March 2021 that a CBDC could be issued in the EU within four years with each country in the EU contributing to research and development. 

  • France has collaborated with the ECB, trying out several pilots and tests to examine its viability. 
  • Germany has been more conservative in its approach, opting instead to assess the risks that might present themselves if a CBDC were adopted. 
  • In post-Brexit Britain, a partnership formed in April 2021 between Her Majesty’s Treasury and the Bank of England was designed to explore the potential of a national CDBC. 

We are on the precipice of a global financial revolution. One must only look at the rapid adoption of cryptocurrency which rivals the adoption of the internet itself. The many benefits may offer individuals a frictionless and transparent relationship with money, as well as offering those in less fortunate positions some hope that the future will be bright, however, It is clear that an enormous amount of research must be conducted in order for the optimal approach to be found and implemented effectively.


Biyani, N., Graham, N., Howlett, W., Jeon, A., Lee, R., Shankar, V., & de Villiers, S. (2021, July 28). Central bank digital CURRENCY TRACKER. Atlantic Council.  

Hertig, A. (2020, December 22). What is A CBDC? CoinDesk.

Mcdonald, J. (2021, August 13). Governments want in on crypto, too. Emerging Tech Brew.