A central bank digital currency, or CBDC, is digital money issued as a direct liability of a central bank and denominated in the country’s official currency. Retail CBDCs are designed for households and businesses, while wholesale CBDCs are generally intended for financial institutions and settlement between participants in the financial system.
A CBDC may look like money in an ordinary banking or payment app, but the financial claim underneath the screen is different.
The defining question is not whether the money is electronic.
The defining question is:
Who owes the money to the holder?
For a CBDC, the claim is on the central bank. A commercial bank deposit represents a claim on the commercial bank, while electronic money is normally a claim on the e-money issuer. An unbacked cryptocurrency may not represent a financial claim on an issuer at all.
That liability-first distinction is the most useful starting point for understanding CBDCs.
What Does CBDC Mean?
CBDC stands for central bank digital currency.
A retail CBDC is a digital form of central bank money that can potentially be used by households and businesses for everyday payments. A wholesale CBDC is designed for a more restricted group, typically regulated financial institutions using central bank money for settlement and financial-market transactions.
The word “digital” can make CBDCs sound more revolutionary than they are.
Most modern money already moves electronically.
Consumers pay by card, transfer funds through banking applications and receive salaries into digital account balances. Those transactions do not automatically involve CBDC.
The distinguishing feature of a CBDC is central bank liability in digital form, not simply electronic access.
Retail CBDC vs Wholesale CBDC
Retail and wholesale CBDCs serve different users and should not be treated as interchangeable concepts.
| Feature | Retail CBDC | Wholesale CBDC |
|---|---|---|
| Main users | Households and businesses | Banks and financial institutions |
| Typical purpose | Everyday payments | Financial-market and interbank settlement |
| Issuer | Central bank | Central bank |
| Currency | National currency | National currency |
| Access | Potentially broad public access | Restricted institutional access |
| Main comparison | Cash, deposits, e-money, payment apps | Central bank reserves and settlement systems |
| Key policy questions | Privacy, adoption, inclusion, bank funding | Settlement efficiency, interoperability, tokenisation |
The 2024 BIS survey found that central banks’ work on wholesale CBDCs had advanced further overall than work on retail CBDCs.
This distinction matters because the phrase “CBDC adoption” can hide two very different projects.
A country may be actively testing tokenised central bank money for financial institutions while having no immediate plan to give consumers a retail CBDC wallet.
How Does a CBDC Work?
The exact architecture varies by country, but a retail CBDC system can be understood through six functions.
1. The Central Bank Issues the Money
The monetary liability originates with the central bank.
If a user holds 100 units of retail CBDC, the underlying monetary claim is ultimately on the central bank rather than on the private company providing the wallet interface.
2. Banks or Payment Providers May Distribute It
A central bank does not necessarily need to provide every customer-facing service itself.
A two-tier model can allow commercial banks and payment service providers to handle functions such as onboarding, identity checks, custody and front-end applications while the central bank remains responsible for the CBDC itself. World Bank and BIS research identifies this division of responsibilities as one way to involve the existing payment ecosystem while limiting disruption.
This creates an important distinction:
The company providing a CBDC wallet does not necessarily issue the money stored in it.
3. The User Holds or Accesses a CBDC Balance
Access might be provided through:
- a mobile application;
- a bank application;
- a payment card;
- another authorized device or interface.
The user experience may therefore resemble an existing digital wallet even though the legal nature of the balance is different.
4. The User Makes a Payment
A retail CBDC could potentially support:
- person-to-person transfers;
- merchant payments;
- online purchases;
- government payments;
- other domestic payment use cases.
Some designs also investigate offline functionality so that selected payments may continue when internet connectivity is unavailable. IMF research notes that offline capability is an important design consideration for many central banks exploring retail CBDCs.
5. The Transaction Is Recorded and Settled
The system updates ownership or balances according to the chosen CBDC architecture.
The settlement asset remains central bank money.
That is one of the major structural differences between a CBDC payment and a payment that ultimately transfers a commercial bank liability.
6. CBDC and Other Forms of Money Can Interact
A useful CBDC would normally need some way to interact with the wider monetary system.
Users may need to move between:
- CBDC;
- bank deposits;
- cash;
- payment accounts.
The practical usefulness of the system therefore depends not only on issuance but also on distribution, acceptance and interoperability.
The Liability Test: The Simplest Way to Identify a CBDC
Users often classify digital money by the technology they can see.
That creates confusion.
A better method is to classify the money by who stands behind the monetary claim.
| Digital Balance | Primary Claim |
|---|---|
| CBDC | Central bank |
| Commercial bank deposit | Commercial bank |
| E-money balance | E-money issuer |
| Typical unbacked cryptocurrency | Usually no issuer claim |
| Stablecoin | Depends on issuer and legal structure |
This framework explains why several balances can display the same currency amount while representing different financial assets.
A balance of $100 in a bank account and $100 of hypothetical retail CBDC may have identical nominal values, yet the holder’s counterparty is different.
The interface does not determine the money.
The liability does.
CBDC vs Electronic Money
CBDC and electronic money can both support digital payments, but they should not be treated as the same product.
An e-money balance normally represents a claim on a private issuer that creates electronic monetary value after receiving funds. A CBDC represents central bank money in digital form.
For the full structure of prepaid digital balances, see our guide to electronic money and e-money.
| Criterion | CBDC | E-Money |
|---|---|---|
| Issuer | Central bank | Private e-money issuer |
| Monetary liability | Central bank | E-money institution |
| Typical denomination | National currency | National currency |
| Main use | Depends on CBDC design | Payments and stored value |
| Blockchain required | No | No |
| Credit risk relationship | Claim on central bank | Claim on private issuer |
| Distribution | May involve banks and PSPs | Private payment providers |
Both can therefore feel like digital wallets while representing different layers of the monetary system.
CBDC vs Bank Deposits
A commercial bank deposit is a liability of a commercial bank.
A CBDC is a liability of the central bank.
This difference becomes important because commercial banks do more than process payments.
Banks use deposits, wholesale funding, capital and other resources to support lending and financial intermediation.
If consumers moved a substantial share of bank deposits into retail CBDC, bank funding structures could change. IMF research identifies bank funding and lending, fee income, run risk, information flows and payment-system resilience among the channels through which retail CBDC could affect financial stability.
That does not mean a retail CBDC automatically destabilizes banks.
The effect depends on:
- adoption;
- holding limits;
- remuneration;
- conversion rules;
- banking-sector structure;
- behavior during financial stress.
CBDC design is therefore also a financial-stability decision.
CBDC vs Cryptocurrency
A CBDC is not simply a government cryptocurrency.
A central bank digital currency represents central bank money. An unbacked cryptocurrency is generally a digitally transferable asset whose value and ownership are governed by network rules rather than a claim on a central bank.
For the broader comparison, see digital currency vs cryptocurrency.
| Feature | CBDC | Typical Unbacked Cryptocurrency |
|---|---|---|
| Issuer | Central bank | Often no central issuer |
| Unit of account | National currency | Crypto-native unit |
| Liability | Central bank liability | Usually no issuer liability |
| Value target | Same national currency unit | Market determined |
| Blockchain required | No | Commonly used |
| Monetary authority | Central bank | Protocol/network governance |
| Main purpose | Money and settlement | Varies by asset |
The phrase “digital currency” is broad enough to include very different structures.
That is why the issuer and claim are more informative than the word “digital.”
CBDC vs Stablecoin
CBDCs and stablecoins can both aim to maintain a stable value relative to an existing currency, but the source of that stability differs.
A CBDC is the central bank’s own monetary liability.
A stablecoin is generally a privately issued crypto asset whose value depends on its specific reserve, redemption, governance and legal arrangements.
The distinction can be summarized as:
CBDC = the central bank’s digital money.
Stablecoin = a private digital instrument designed to track another asset or currency under a particular issuance structure.
The 2024 BIS survey found that more than one-third of surveyed jurisdictions had accelerated CBDC work in response to developments in stablecoins and other cryptoassets.
Does a CBDC Need Blockchain?
No.
Blockchain is not a defining requirement of central bank digital currency.
A CBDC can theoretically use:
- a centralized database;
- distributed ledger technology;
- token-based architecture;
- account-based architecture;
- combinations of different technologies.
The monetary nature of the instrument comes from the issuer and legal claim, not from the database architecture.
This prevents one of the most common CBDC misconceptions.
Changing the ledger technology does not by itself change who issued the money.
Why Are Central Banks Exploring CBDCs?
Central banks do not all have the same reason for exploring CBDCs.
Potential motivations include:
- preserving access to central bank money as cash use changes;
- improving payment resilience;
- increasing competition in payments;
- supporting financial inclusion;
- improving settlement infrastructure;
- responding to new private digital money;
- supporting tokenised financial markets;
- improving selected cross-border payment processes.
The 2024 BIS survey covered 93 central banks, and 91% — 85 institutions — reported that they were exploring a retail CBDC, a wholesale CBDC or both. Wholesale CBDC projects were, in aggregate, at more advanced stages.
That figure demonstrates strong research activity.
It does not mean that 91% of central banks are preparing to launch a CBDC.
Research, experimentation, pilots and issuance are different stages.
Information Gain: CBDC Does Not Automatically Solve the Fast-Payment Problem
One of the most important CBDC questions is rarely answered by defining the technology:
What problem requires a new form of central bank money rather than a better payment system using existing money?
Fast payment systems already allow near-real-time retail transfers in many countries without creating a retail CBDC.
A joint BIS and World Bank study reported that consumers and businesses in about 120 jurisdictions could already make or receive payments through domestic or regional fast payment systems.
The same research provides striking adoption comparisons.
Brazil’s Pix passed 150 million individual and business users during its first year and was later used by more than 90% of adults. Thailand’s PromptPay had around 63 million users in early 2022, while India’s UPI processed more than 13 billion transactions in a peak month by March 2024.
Those systems transfer private money rather than creating a new retail central bank liability.
This leads to an important policy principle:
A central bank should not evaluate a CBDC only by asking whether the technology can make payments faster. It should ask whether issuing a new form of central bank money creates benefits that existing fast-payment infrastructure cannot deliver efficiently.
CBDC and fast payments can also complement each other rather than compete. Interviews conducted for the BIS–World Bank study found several central banks viewing the two infrastructures as potentially serving different purposes.
Launching CBDC Is Easier Than Creating Everyday Usage
A technologically functioning CBDC does not automatically become widely used money.
As of September 2024, the BIS–World Bank study identified live general-purpose retail CBDCs in the Bahamas, Jamaica and Nigeria. The study also found that early adoption in some launched systems had been slow compared with major fast-payment networks.
For example, the study reported roughly 100,000 Sand Dollar wallets in the Bahamas in March 2023, equivalent to about one-quarter of the adult population. Nigeria had around 900,000 eNaira wallets one year after launch, about 0.5% of the population at the time measured.
These historical adoption figures reveal an important lesson:
Issuance creates availability. It does not create demand.
For a retail CBDC to become useful, users also need reasons to choose it over:
- cash;
- bank transfers;
- cards;
- e-money wallets;
- fast-payment applications.
Merchant acceptance, usability, trust, incentives and interoperability may matter as much as the underlying ledger.
CBDC Adoption Is an Ecosystem Problem
A useful retail CBDC needs more than a central bank and a database.
The operating ecosystem may include:
- central bank;
- commercial banks;
- payment service providers;
- merchants;
- technology providers;
- identity services;
- telecommunications networks;
- consumers and businesses.
The BIS–World Bank research notes that banks and non-bank payment providers can handle onboarding, know-your-customer processes, custody and other customer-facing services in two-tier CBDC structures.
This creates another useful way to evaluate a CBDC:
Do not ask only whether the core ledger works. Ask whether the complete payment journey works.
A CBDC that cannot be obtained easily, accepted widely or converted smoothly into other forms of money may have limited practical usefulness even if its core technology performs perfectly.
Would a CBDC Replace Cash?
Not necessarily.
Many retail CBDC proposals describe digital central bank money as a complement to cash, not a mandatory replacement.
The ECB, for example, describes the proposed digital euro as an electronic equivalent to cash that would complement euro banknotes and coins.
The policy choice can vary by jurisdiction.
Cash still offers characteristics that are difficult to reproduce perfectly in digital form, including physical possession and payment without dependence on normal digital infrastructure.
For this reason, the relationship between CBDC and cash should be examined separately in each design.
Can a CBDC Work Offline?
Potentially.
Offline CBDC functionality is being studied because digital payments can become unavailable during:
- internet outages;
- telecommunications failures;
- power disruptions;
- natural disasters;
- other infrastructure problems.
IMF technology research notes that central banks are examining approaches intended to provide broad access and operation under difficult conditions, and BIS survey evidence has shown substantial central-bank interest in offline functionality.
Offline payments create their own design challenges.
The system needs to address issues such as:
- double spending;
- device security;
- transaction limits;
- synchronization;
- lost devices;
- fraud controls.
Offline CBDC is therefore not simply an ordinary wallet with the internet switched off.
CBDC and Privacy
Privacy is one of the most sensitive retail CBDC design questions.
A CBDC is not automatically anonymous, but it is also incorrect to assume that every CBDC architecture requires the central bank to see every consumer’s identity and purchase details directly.
Privacy depends on:
- data architecture;
- role of intermediaries;
- identification requirements;
- transaction limits;
- anti-money-laundering rules;
- offline functionality;
- legal protections.
The proposed digital euro illustrates how different layers can be separated. The ECB states that, under its planned model, the Eurosystem would not be able to identify an individual or what that person purchased from payment data received by the Eurosystem.
That is a design goal for one proposed CBDC, not a universal property of CBDCs.
The correct privacy question is therefore:
Which entity can access which data, under what conditions, and for what purpose?
Could CBDC Cause Bank Runs?
A poorly designed retail CBDC could potentially make it easier for depositors to move funds from commercial banks into central bank money during stress.
The risk is sometimes described as rapid or “fast” disintermediation.
IMF analysis identifies run risk and changes to bank funding among the channels policymakers should evaluate when considering retail CBDC.
Possible design controls include:
- holding limits;
- transaction limits;
- tiered remuneration;
- conversion controls;
- intermediary-based distribution.
The existence of these tools does not mean every risk disappears.
It means CBDC design can influence how strongly the product interacts with the banking system.
Five Ways a Retail CBDC Project Can Fail
1. No Clear User Problem
A country may already have cheap, instant and widely accepted digital payments.
Adding another wallet without a distinct benefit can create infrastructure without meaningful demand.
2. Weak Merchant Acceptance
Consumers have little reason to hold payment money that cannot be spent where they shop.
A CBDC needs an acceptance network, not merely a download page.
3. Difficult Onboarding
Complex identity verification, device requirements or confusing wallet setup can exclude the users that financial-inclusion policies are intended to reach.
4. Privacy Is Poorly Explained
Even technically strong privacy controls may fail to build trust when users do not understand who can view transaction information.
5. CBDC Is Treated as a Technology Project
A successful monetary product requires legal rules, distribution, incentives, consumer protection, operational resilience and integration with existing financial institutions.
The ledger is only one component of the system.
A Seven-Question Framework for Evaluating Any CBDC
When reading about a CBDC project, ignore the marketing language initially and answer seven questions.
1. Who Can Hold It?
Is the system designed for the public, financial institutions or both?
2. What Is the Legal Claim?
Does the holder have a direct claim on the central bank?
3. Who Provides the Wallet?
Does the central bank interact directly with users, or do banks and payment providers provide customer services?
4. What Problem Is It Solving?
Is the objective:
- payment resilience;
- inclusion;
- competition;
- settlement;
- monetary sovereignty;
- tokenisation;
- cross-border payments?
A project without a clear use case is difficult to evaluate.
5. How Does It Interoperate?
Can users easily move funds between CBDC, bank accounts and other payment systems?
6. What Happens During Failure?
Can payments work during an outage?
What happens if a phone is lost?
How are mistaken or fraudulent transactions handled?
7. Why Would Users Choose It?
This may be the most important question.
Technical capability is not the same as adoption.
Users need a practical reason to change established payment behavior.
Real CBDC Examples and Projects
CBDC development occurs at different stages, so “CBDC project” does not always mean a currency has been launched.
The Bahamas
The Central Bank of The Bahamas launched the Sand Dollar as a retail CBDC. It has been one of the earliest examples used in international studies of operational retail CBDCs.
Jamaica
Jamaica has launched JAM-DEX for retail use and is included among the live retail CBDC systems identified in BIS and World Bank research.
Nigeria
Nigeria launched the eNaira and has continued developing its retail CBDC ecosystem. BIS–World Bank research also highlights features intended to broaden access, including support related to feature-phone usage.
Digital Euro
The digital euro is not currently an issued CBDC.
As of August 2026, the ECB is continuing the project’s development phase. A new draft rulebook version was published in July 2026, and the ECB says it aims to be technically ready for a potential first issuance during 2029 if the necessary EU legislation is adopted in 2026.
This distinction is important:
Researching, piloting or preparing a CBDC is not the same as issuing one.
Key Takeaways
- CBDC means central bank digital currency.
- A CBDC is a digital liability of a central bank, not merely money displayed electronically.
- Retail CBDCs are intended for broader public use, while wholesale CBDCs primarily target financial institutions.
- CBDC does not require blockchain technology.
- A CBDC differs from a bank deposit because the monetary claim is on the central bank rather than a commercial bank.
- A CBDC differs from e-money because e-money is normally a liability of a private issuer.
- A CBDC differs from typical cryptocurrency because it represents sovereign central bank money rather than an independently priced crypto asset.
- In the BIS 2024 survey, 91% of 93 participating central banks were exploring retail CBDC, wholesale CBDC or both.
- Fast payments can already deliver instant digital transfers without creating a CBDC, so speed alone is not always a sufficient reason for issuance.
- Retail CBDC success depends on adoption, acceptance, distribution, interoperability, trust and resilience—not only technology.
- CBDC policy should be evaluated by the problem being solved, not by how advanced the underlying technology sounds.
Frequently Asked Questions
What is a CBDC?
A CBDC is a central bank digital currency: digital money issued as a liability of a central bank and denominated in the country’s official currency. Retail CBDCs can be designed for public payments, while wholesale CBDCs are generally designed for financial institutions and settlement.
What does CBDC stand for?
CBDC stands for central bank digital currency.
Is CBDC a cryptocurrency?
No. A CBDC represents central bank money. Typical unbacked cryptocurrencies are not liabilities of a central bank and normally have market-determined values.
Is CBDC the same as electronic money?
No. Electronic money generally represents a claim on a private e-money issuer, while a CBDC represents a claim on the central bank.
Is money in my bank account a CBDC?
No. An ordinary commercial bank deposit is a liability of the commercial bank. A CBDC would be a liability of the central bank.
Does CBDC require blockchain?
No. A central bank can design CBDC using different ledger architectures. Blockchain or distributed ledger technology is an implementation choice rather than a defining requirement.
Will CBDC replace physical cash?
Not necessarily. Some central banks explicitly describe proposed retail CBDCs as complements to cash. The ECB, for example, says a potential digital euro would complement banknotes and coins.
Can CBDC work without the internet?
Some retail CBDC designs are exploring offline payments. Offline operation requires additional security and synchronization mechanisms, so its capabilities depend on the specific system.
Are CBDCs already in use?
Yes, but retail CBDC issuance remains limited compared with the number of central banks researching the technology. BIS–World Bank research identified the Bahamas, Jamaica and Nigeria as jurisdictions with live retail CBDCs, while many other projects remain at research, pilot or preparation stages.
Why would a country need CBDC if it already has instant payments?
It may not need one solely for payment speed. A country could explore CBDC for access to central bank money, resilience, monetary sovereignty, settlement architecture, financial inclusion or other policy objectives. Fast-payment systems and CBDCs can also coexist.
Final Thoughts
The most useful way to understand a CBDC is not to begin with blockchain, apps or digital wallets.
Begin with the monetary claim.
A CBDC is significant because it makes central bank money available in a new digital form.
From there, the real questions are practical:
Who can hold it?
Who distributes it?
Where can it be spent?
What information does the system collect?
Can it work during an outage?
How does it interact with bank deposits and e-money?
And, most importantly, what problem does it solve better than the payment infrastructure that already exists?
The global CBDC debate is therefore not simply a race to digitize money.
Money is already extensively digital.
The more important question is which form of digital money should sit at each layer of a modern financial system, who should issue it, and what risks and responsibilities come with that choice.