Central Bank Digital Currencies (CBDCs) are tipped as the most significant monetary shift in 50 years, since the US left the gold standard in 1971. As of 2025, 137 countries, making up 98% of global GDP, are engaged in researching, developing, and piloting national CBDCs.
Governments are racing to launch digital currencies into their economies to avoid being left behind in an industry predicted to reach $213 billion in transaction volume by 2030.
In the article, you’ll learn why countries are launching CDBCs, how China’s e-CNY is leading the way, and the challenges facing central banks in their quest for digital transformation.
What is a CBDC?
A Central Bank Digital Currency or ‘CDBC’ is a digital form of a sovereign nation's legal currency. Most often, they are blockchain-based cryptocurrencies that are issued and controlled by governments or central authorities. Unlike decentralized cryptocurrencies, a government-issued CDBC is legal tender and can be used for payments of goods or services.
The concept of CDBCs is still relatively new, and very few nations have actually launched this new style of digital money. Most countries are still developing, testing, and piloting CDBCs, but they are likely to be officially implemented with increasing speed over the coming years.
While the architecture is still being designed, most will rely on a two-tier system where a country's central bank issues the coins, and commercial banks are responsible for distribution. CBDCs rely on blockchain technology to deliver 24/7, instant settlement, while smart contracts enable deeper levels of financial automation.
Motivations for CBDC Adoption
A big attraction for governments is the traceability and transaction history recorded on a blockchain network. This provides complete traceability for ‘digital cash’ compared to traditional notes and coins, which are not traceable.
Centralized control is a significant factor in the distinction between CDBCs and traditional cryptocurrencies. Decentralized cryptocurrencies, such as Bitcoin, are nearly impossible for governments and central banks to control and regulate. In contrast, CDBCs run on a blockchain, over which governments maintain centralized control, allowing them to manage access, supply, and technical implementation.
Monetary Policy
While cryptocurrencies like stablecoins help modernize payment infrastructures, for Central Banks, this leads to relinquished control. Introducing CBDCs offers an efficient solution while allowing regulators to maintain control over monetary policy. This means nations can retain direct control over money supply and payment data, which is critical in the efficient maintenance of a country’s economy.
Payment System Modernization
Traditional banking infrastructures are often antiquated, expensive, and slow. With the cross-border payment market projected to surpass $250 billion by 2027, central banks need to adapt to the changing times. CBDCs are the modern, high-speed solution that enables national currencies to keep pace with the rapidly evolving digital demands.
Geopolitical Competition
Political influence around the globe heavily relies on a country's economic standing. Trading relationships are built on the strength of a nation's currency, none more so than the U.S. dollar, the world’s ‘reserve currency’, underpinning international trade. China’s ‘Digital Yuan’ is a warning sign for the U.S. dollar and the Euro that they need to make their moves to avoid being undermined.
Cryptocurrency Threat
Most governments see decentralized cryptocurrencies as a threat rather than a modern advancement. If citizens switch to using these digital currencies for payments and finances, central banks will begin to lose much of their control over monetary policy. There is significant support for digital currencies, and rather than fighting against crypto, governments are seeking to introduce their own as a response to demand.
Financial Inclusion
Approximately 1.7 billion adults worldwide remain unbanked, including 5.4% of US households. Digital currencies offer direct access to central bank money without the need for traditional banking infrastructure. The lower barrier to entry gives CBDCs the potential to boost financial inclusion for unbanked populations, even in remote areas.
Case Studies
Next, let’s look at countries that have already launched CDBCs and how these attempts have been received in countries such as China and Nigeria.
e-CNY (China)
China’s digital yuan (e-CNY) is the most prominent example of a CBDC launch. It was rolled out in 2020 to 29 cities, and there are now over 261 million e-CNY wallets. Adoption among local merchants is still limited, although it has been implemented in public transport systems in major cities like Beijing. Additionally, it was one of three payment methods accepted during the 2022 Beijing Winter Olympics. This, in part, helped grow the cumulative transaction volume to over $7.3 billion by 2024, as reported by the Digital Currency Research Institute.
eNaira (Nigeria)
In October 2021, Nigeria launched eNaira, the digital version of the Nigerian currency. It was launched to modernize the country’s payment system, reduce transaction costs, and enhance monetary policy. By 2025, there was N18.31 billion ($11.4 million) in circulation, which is just 0.37% of the total currency circulation. Although there are 282+ thousand registered users, 98.5% of wallets remain inactive.
Challenges & Concerns
While CDBCs appear to be the future for national currencies, the introduction of this technology comes with several challenges and concerns:
Scale requirements: CBDCs must be able to handle millions of transactions to function efficiently in an economy. Blockchain technology is still being developed to handle these demands with zero latency.
Infrastructure interoperability: Digital currencies need to integrate with traditional payment systems and currencies. CBDCs are unlikely to supersede current legal tenders in the short to medium term.
Legislation: Regulators are still learning how to implement new frameworks to govern digital assets. This remains a continued challenge, as technology is developing rapidly, constantly shifting the goalposts for legislators and users.
Control fears: Many of the general population have “Orwellian” fears of government oversight and control. Digital currencies give central banks unprecedented control and state surveillance.
Cybersecurity: CBDCs introduce new attack vectors that expose banks to additional cybersecurity risks. Threats are increased from individual hackers, organized crime, and enemy states, all of which add more potential vulnerabilities to economic stability.
The Future of CBDCs
Over the next few years, the future of CBDCs is likely to focus on exploration and development. A growing number of governments are researching and piloting digital currencies, although they are still at least a year or two away from launch. As we’ve seen with previous attempts from countries like China and Nigeria, launching CDBCs is one thing, but encouraging adoption from citizens appears to be an even bigger barrier to overcome. That being said, the next 5 to 10 years are an exciting time for technology, with studies suggesting global CBDC payments could surge to billions by 2030.
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