A Central Bank Digital Currency (CBDC) is a digital form of a country's official money, issued directly by its central bank rather than a private company or crypto network. Interest has exploded in the last few years, with more than 130 countries now researching, piloting, or launching one.
Here are the facts worth knowing about how CBDCs actually work, who's building them, and what makes them different from cash and cryptocurrency.
CBDCs are not cryptocurrencies — they are digital versions of a country's official currency, issued and backed by its central bank, making them legal tender just like paper money.
The Bahamas launched the Sand Dollar in October 2020, making it the world's first nationwide central bank digital currency.
China's digital yuan (e-CNY) is one of the largest CBDC pilots on Earth, expanding from four test cities in 2020 to more than two dozen cities and regions, with cumulative transactions surpassing 7 trillion yuan (over $1 trillion) by late 2024.
Nigeria launched the eNaira in October 2021, becoming the first African country to roll out a central bank digital currency.
Jamaica's CBDC, called JAM-DEX, was granted legal tender status in 2022 after a pilot program run by the Bank of Jamaica.
The Eastern Caribbean Central Bank launched DCash in 2021 for use across several member states, including Antigua and Barbuda, Grenada, and Saint Lucia.
The Bank of Korea has been running real-world CBDC pilots (most recently under the name 'Project Hangang') that let citizens convert bank deposits into digital tokens for everyday payments.
The European Central Bank has been in a multi-year 'preparation phase' for a potential digital euro, though no final decision to issue one has been made.
CBDCs can be built in two main forms: account-based, which is tied to verified identities, or token-based, which functions more like digital cash.
Because CBDC transactions run through digital ledgers, they can leave a traceable record — a feature central banks say helps fight money laundering and tax evasion, but one that has also raised privacy concerns among critics.
A fully digital currency could eventually reduce the cost governments spend printing, storing, and distributing physical cash.
Some CBDC designs include programmable features, such as smart contracts, that could automatically trigger payments once certain conditions are met.
Most CBDC designs are not fully anonymous the way cash is; privacy features vary widely by country and are often a central point of public debate.
CBDCs are frequently proposed as a tool to reach unbanked and underbanked populations by giving anyone with a phone direct access to central-bank-backed money.
Cross-border payment projects, such as the multi-country Project mBridge involving China, Hong Kong, Thailand, the UAE, and Saudi Arabia, are testing whether CBDCs can make international transfers faster and cheaper.
As of the mid-2020s, more than 130 countries — representing the vast majority of global GDP — are researching, piloting, or developing a CBDC, according to the Atlantic Council's CBDC tracker.
Only a small handful of countries, including the Bahamas, Nigeria, Jamaica, and the Eastern Caribbean states, have actually launched a CBDC nationally; most others remain in research or pilot stages.
Designing a CBDC involves balancing competing priorities — monetary policy, cybersecurity, financial stability, and personal privacy — which is why most central banks are moving cautiously rather than rushing to launch.
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