Central Bank Digital Currency (CBDC)

A central bank digital currency (CBDC) is a digital form of a country's official currency issued and backed by its central bank, carrying the same legal status as physical banknotes. Unlike bank deposits, which are liabilities of commercial banks, or cryptocurrencies, which are issued by private entities, a CBDC is a direct liability of the central bank itself. As of 2025, the Bahamas, Jamaica, and Nigeria have fully launched CBDCs. The Atlantic Council's CBDC Tracker reports that 137 countries representing 98% of global GDP are exploring CBDCs, with 49 pilot programs currently active worldwide.

Think of a CBDC like a government-issued digital banknote: it represents the same central bank guarantee as physical cash, just in a form you hold in a digital wallet instead of your physical one.

Retail and Wholesale CBDCs Serve Different Users

Retail CBDCs are designed for use by households and businesses in everyday transactions, functioning as a digital equivalent of physical cash. The Federal Reserve describes retail CBDC as a digital liability of the central bank that is widely available to the general public. Wholesale CBDCs are designed for use by commercial banks and other licensed financial institutions to settle interbank payments and securities transactions. Most current pilot programs focus on retail CBDCs, though cross-border wholesale CBDC projects have expanded significantly since the G7 sanctions response to Russia's 2022 invasion of Ukraine.

The United States Is an Outlier Among Peer Central Banks

In 2025, President Trump issued an executive order halting all U.S. government work on a retail CBDC, citing privacy concerns about government surveillance of financial transactions. This makes the United States the only major economy to formally pause retail CBDC development. The U.S. continues to participate in Project Agorá, a cross-border wholesale CBDC research initiative with six other major central banks. The European Central Bank is advancing the digital euro project. India's e-rupee reached circulation of approximately 10.16 billion rupees (around $122 million) by March 2025, up 334% from the prior year.

Privacy and Banking Structure Are the Primary Concerns

Proponents argue that CBDCs improve financial inclusion, enable faster and cheaper domestic and cross-border payments, and give governments a resilient monetary tool. Critics raise two main objections. The first is privacy: a programmable CBDC gives governments real-time visibility into every citizen's financial transactions with no equivalent of physical cash anonymity. The second is disintermediation risk: if households hold CBDCs directly with the central bank rather than keeping deposits at commercial banks, it could reduce the volume of commercial bank deposits, constraining the banking system's ability to make loans.

Sources:
https://www.atlanticcouncil.org/cbdctracker/
https://www.federalreserve.gov/cbdc-faqs.htm
https://www.weforum.org/stories/2024/02/wholesale-retail-cbdcs-difference/
https://www.imf.org/en/topics/digital-payments-and-finance/central-bank-digital-currency/virtual-handbook