Raynor de Best
Content expert covering payments and (crypto)currencies
CBDC (Central Bank Digital Currencies) - statistics & facts
Central Bank Digital Currencies, or CBDC, refers to the attempts of central banks to develop digital variants of the euro, Swedish króna, or Chinese renminbi - a trend that increasingly hit the news. This is because the number of countries worldwide that are actively developing a CBDC continued to grow, and reached well over 100 by 2024. Are CBDC like other digital currencies, like Bitcoin? And why are so many countries developing such coins?
Central Bank Digital Currencies received much attention, both for their day-to-day payments potential and how much it goes against some of the design ideas embedded in cryptocurrency. As one of the first big use cases of blockchain technology for a wide audience, this attention is unlikely to go away any day soon.
CBDC vs. crypto
Like cryptocurrency, CBDC are virtual currencies that rely on blockchain technology to function. CBDC, at first glance, looks especially similar to stablecoins such as Tether (USDT) - the cryptocurrencies that are pegged to real-world assets like the U.S. dollar. The key difference, however, is that CBDC are issued and regulated by a central bank. Cryptocurrencies and stablecoins come from private individuals or companies. Indeed, a company like Tether Operations Limited faced increasing legal scrutiny on how it tries to back its USDT stablecoin. That said, some consumers deliberately use cryptocurrencies like Bitcoin because they are against monetary control of central banks or governments.CBDC use cases
Why are central banks developing their own digital currencies? The key drivers for CBDC development varied between developed and emerging countries. Central banks from developed countries hoped to preserve their monetary sovereignty, or to improve payment efficiency. For developed countries, however, financial inclusion was the motivation. Perhaps consequently, central banks from outside Europe observed more use cases for CBDC than their Western counterparts. Indeed, the main "live" CBDC by 2024 are in China, Nigeria, the Bahamas, and Jamaica. It should be noted, however, that the penetration of CBDC in countries that already use them is relatively low. This as CBDC are not yet integrated to other payment methods or established payment processes.A long-term trend
Most CBDC projects will not be finished in 2024, or even 2025. Europe's CBDC, the digital euro, will launch between 2026 or 2029. The United States Federal Reserve wrote its first CBDC review in 2022, meaning it likely ranks behind countries that are already developing a retail-focused CBDC. Additionally, countries like Canada or the United Kingdom are investigating blockchain technology to optimize banking processes rather than for consumers. One reason why, could be that consumers in the EU were concerned about privacy when a “digital euro” might release in the future.Central Bank Digital Currencies received much attention, both for their day-to-day payments potential and how much it goes against some of the design ideas embedded in cryptocurrency. As one of the first big use cases of blockchain technology for a wide audience, this attention is unlikely to go away any day soon.
