BEIJING, July 8 — More than 100 countries were exploring central bank digital currencies as of 2023, according to the Atlantic Council, a figure that underscores the rapid global shift toward state-issued digital money. The People’s Bank of China launched the most advanced pilot among major economies, the digital yuan or e-CNY, in April 2020. By the end of 2022, transactions using the e-CNY had surpassed $250 billion, and the pilot program had expanded to cover over 20 cities.
This scale makes China the clear front-runner in the global race to digitize fiat currency. The European Central Bank began investigating a digital euro in October 2021, and launched a formal two-year investigation phase in July 2023.
That process is ongoing, with no decision yet on issuance. The US Federal Reserve released a discussion paper in January 2022 that outlined potential benefits and risks, but the Fed has not committed to issuing a digital dollar. The Bank of England and the Bank of Japan are also conducting research into CBDCs, reflecting a broad consensus among advanced economies that the technology warrants serious study.
The Bahamas, however, was the first country to launch a fully deployed CBDC, the Sand Dollar, in October 2020.
Defining the technology
Central bank digital currencies are digital forms of a country’s fiat currency, issued and regulated directly by the central bank. Unlike cryptocurrencies such as Bitcoin, CBDCs are centralized and carry the full backing of the issuing government. They are designed to function as legal tender, just like physical cash.
According to the International Monetary Fund, which has developed a ‘CBDC Handbook’ to guide countries in implementation, the technology aims to improve payment efficiency, expand financial inclusion, and enhance monetary policy transmission. These goals are particularly relevant in economies where large segments of the population lack access to traditional banking services.
Risks and concerns
The push toward CBDCs is not without controversy. Privacy advocates and cybersecurity experts have raised concerns about the potential for government surveillance, given that a central bank could theoretically track every transaction made with its digital currency. The source material notes that CBDCs raise concerns about privacy, cybersecurity, and the potential for government surveillance.
These issues have slowed progress in some jurisdictions. The US Federal Reserve’s discussion paper acknowledged both the potential benefits and the significant risks, including threats to financial stability and the role of commercial banks.
No timeline for a US CBDC has been announced.
What to watch
The digital yuan pilot continues to expand in China, providing real-world data on how CBDCs function at scale. The European Central Bank’s investigation phase is expected to conclude in late 2025, which could lead to a decision on issuance. The Bank of England and Bank of Japan are expected to release further research findings in the coming months.
The IMF’s CBDC Handbook is likely to become a key reference for developing nations considering their own digital currencies, offering a framework for implementation that balances efficiency gains against privacy and security risks.
