More than 130 countries are exploring central bank digital currencies, covering over 98% of global GDP. A CBDC is not a payment app balance and not privately issued e-money. It is digital sovereign currency issued and backed by a central bank, existing only in digital form.
In the source material, a CBDC is described as a direct liability of the central bank, placing it in the same legal category as cash or central bank reserves. That sets it apart from bank deposits and wallet balances, which depend on intermediaries and carry commercial risk. The article also notes that the US Federal Reserve has said a retail CBDC would require legislation and congressional authorization before issuance.
How CBDCs differ from cash, deposits, and private digital money
The practical case for CBDCs becomes clearer when compared with the tools people already use. Cash offers offline reliability and stronger privacy. A CBDC is framed instead as a digital cash-like instrument that could complement, not automatically replace, physical notes. Bank deposits may already feel digital, but they remain liabilities of commercial banks, while a CBDC would be central bank money.
Payment apps are built around convenience and interface design, yet they usually operate as private systems. A CBDC, by contrast, is presented as an open public core that can connect with familiar wallets. The article draws a sharper line with crypto and stablecoins: all are digital assets, but CBDCs are public money tied to national policy, while cryptocurrencies and stablecoins are private arrangements with different purposes and structures.
Retail CBDCs and wholesale CBDCs serve different users
The source breaks CBDCs into two broad models. Retail CBDCs are designed for the public and everyday payments, typically through digital wallets. They are denominated in local currency and keep a 1:1 relationship with the national unit of account, so they do not carry market price risk against fiat. The stated aim is coexistence with cash, giving the public access to digital central bank money as payment habits shift.
Wholesale CBDCs target financial institutions rather than consumers. Their use case is interbank transfers, large-value settlement, and transactions between banks and the central bank. The article points to possible gains in bond settlement, foreign exchange processing, and cross-border payments, where direct settlement on central bank books could reduce frictions and tighten risk management.
Distribution, wallet access, and infrastructure choices matter
CBDCs are described as payment infrastructure rather than trading instruments. Most live or frequently discussed models use a two-tier structure: the central bank issues the currency, while commercial banks and trusted institutions distribute it. User-facing access would usually come through regulated wallets and apps instead of direct distribution from the central bank to every individual.
When a user sends a CBDC payment, the request is authorized in an app and routed through the financial system for confirmation. The article also pushes back on a common assumption: a CBDC does not have to run on blockchain. Distributed ledger technology is only one option. Centralized databases or hybrid systems may also deliver programmability, record integrity, and security, and may be more efficient at scale.
Why central banks are examining CBDCs now
The article links growing CBDC interest to the post-pandemic acceleration in digital payments and to broader efforts to modernize payment infrastructure. Central banks are studying whether CBDCs could make payments faster and cheaper by cutting out layers of intermediaries. Financial inclusion is another recurring theme, especially for people with limited access to conventional banking who might use a basic digital wallet instead.
Cross-border transfers are also central to the discussion. Some jurisdictions are focused on interoperability and international payment efficiency. Others are looking inward, using CBDC research to reinforce domestic monetary control as payment habits change or as dollarization becomes a policy concern. Citing the Atlantic Council’s CBDC Tracker, the source says progress varies widely across major central banks. As of mid-2025, no major economy had formally launched a retail CBDC, though China’s digital yuan remained the most advanced, with consumers having opened a combined 2.25 billion digital wallets.
Privacy, surveillance, and banking disintermediation remain major concerns
The article gives significant space to criticism as well as potential benefits. Key concerns include privacy and surveillance, stronger government control over money, cybersecurity and operational vulnerabilities, and the possibility of deposit flight from commercial banks. If users move large sums from bank accounts into CBDC holdings, banks could face pressure on their funding base.
It also rejects several popular myths. A CBDC is not simply “government crypto.” It does not always require blockchain, and its launch would not automatically end cash. The source also says CBDCs are not built as investment products. Their final form, if adopted, would depend on each country’s legal framework, policy goals, and technical design choices.