CBDCs: The Current State of Central Bank Digital Currency (CBDC) Developments Around the World

Posted on nov. 16, 2021 | BLOG


What are Central Bank Digital Currencies (CBDC)?
Why do CBDC projects use blockchain technology?
What are the biggest CBDC projects in 2021?
Retail Projects
Wholesale/Interbank Projects


In the first week of November 2021, The Bank of England and the UK Finance Ministry announced plans for a “formal consultation” into the creation of a central bank digital currency or CBDC. If the consultation is successful, Britons can expect the creation of a blockchain-based digital currency that will serve as legal tender by the end of the decade. 

The UK’s CBDC promises to ease financial transactions and bring individuals without access to banking services into the larger economy. Despite this, the UK is a relative late-comer to the CBDC ecosystem. Indeed, numerous comparable projects are already underway, mostly in emerging economies. Then there are the most notable (and controversial) CBDCs like China’s digital yuan, which is earmarked for incredibly ambitious purposes. 

Make no mistake: central bank digital currencies are coming to most countries in the world before the end of the decade, as their unique benefits, speed of use, cost-effectiveness and compatibility with an increasingly digital global economy leave nations with no real choice in the matter.

This article will provide a primer on CBDCs, specifically:

  • An overview of CBDC — including their uses and technology 
  • An analysis of their potential impact
  • Finally, a survey of the largest, most notable CBDC projects 

The UK’s CBDC announcement was one of several CBDC news stories to appear in the news cycle this November. A competition held by the Monetary Authority of Singapore (MAS) awarded the German corporation Giesecke+Devrient and CBDCgo 50,000 dollars each for developing technologies that support CBDCs in the Nation State. Similarly, these government-backed assets are seeing an influx of institutional involvement in an attempt to improve the larger ecosystem. Indeed, institutions including the World Bank and International Monetary Fund (IMF) are pursuing the issue. 

What are Central Bank Digital Currencies (CBDC)?

In the simplest terms, a CBDC is a virtual form of a country’s paper (coin) currency. While most proposed CBDC projects leverage blockchain technology in implementation, CBDC are different from cryptocurrencies like Bitcoin and Ethereum. Unlike cryptocurrencies — which are typically created and regulated by private individuals or organizations — CBDCs are created by a particular country’s monetary authority eg. the US Federal Reserve

This is because CBDCs are created alongside a country’s printed/stamped fiat currency, and are therefore 100% equal in value to the currency they are tied to — be it Dollars, Kroner, Rupee, or Peso — and thus legal tender.

Presently, no CBDCs are in formal use, but their proposed adoption could bring several advantages and disadvantages.

Proposed Benefits of CBDCs

  • May simplify transactions between enterprises and individuals similar to online banking 
  • May make it easier to implement monetary policy (e.g. collecting taxes)
  • May democratize banking services in emerging countries. For example, in cash-based rural economies, some citizens lack access to banking services. The use of CBDC may remedy this issue (when paired with smartphones)
  • May remove the risks and cost associated with using middle-men. As CBDC enables banking without the banks, this may avoid problems like the 2008 Financial Crisis or runs on banks

Possible Disadvantages: 

  • The use of CBDC could reduce individual freedoms. It will be much harder to make discreet individual-to-individual transactions or preserve privacy.
  • Some analysts argue that using CBDC fails to address financial centralization problems 
  • CBDCs can be used for nefarious purposes such as punishing citizens for undesirable behavior by freezing their funds or blocking access to online retail services. 

Why do CBDC projects use blockchain technology?

While not a necessary prerequisite, the majority of CBDC projects leverage blockchain technology (88%) due to the following benefits:

  • Blockchain provides bespoke design and integrated platforms that share/hold value securely
  • They enable smart contract programmability enabling the triggering of financial functions including automatic payments based on predefined conditions (eg. automatically paying your bills on the 5th and 15th)
  • Blockchain also increases the transparency of audit trails to ease taxation and provides confidentiality features unavailable in online banking
  • Using blockchain also improves interoperability with other digital assets (NFT, DeFi protocols, stablecoins etc.)
  • Blockchain technology is immutable and trustless, and permissioned blockchain networks offer flexible scaling and speed while giving the operator full control over privacy and nodes 

What are the biggest CBDC projects in 2021?

Since 2014, more than 60 central banks have begun pursuing CBDC projects. These projects can be divided into two categories: retail and interbank/wholesale projects. 

Retail Projects

Retail projects enable individuals to hold CBDC as they would any other currency. These projects are typically more advanced in emerging economies. Here are 5 interesting new projects.

  1.  The Bahamas Sand Dollar - Launched in 2019, this digital version of the Bahamian dollar is issued from authorized financial institutions. It is accessible through a mobile phone/digital wallet, and supports the issuance of micro-loans. It is the most advanced and widely adopted project on this list.
  2. Project Bakong of Cambodia - Started in 2018 and officially launched in 2020, this quasi-CBDC project links 11 commercial banks, creating an interbank payment system. The Cambodian CBDC is also experimenting with transactions with Maybank (a Malaysia-based bank), enabling Cambodians abroad to easily transfer money home. As with most retail projects, CBDC Bakong seeks to provide rural Cambodians with banking services. It will also increase reliance on Cambodian Riel and decrease reliance on the US Dollar. 
  3. Digital Yuan (DCEP) - China’s first foray into CBDCs started in 2014 and piloted in 4 major cities. The DCEP (Digital Currency Electronic Payment) system, also referred to as the digital yuan or e-yuan, is designed to replace physical currency while securing more control for the central Chinese authorities. USD$ 300 million is presently in circulation. Experts believe this will be heavily promoted during the 2022 Beijing Winter Olympics
  4. E-hryvnia - This Ukrainian based CBDC completed its pilot project in December 2018. The E-hryvnia project focused on analyzing the CBDC’s effects on macroeconomic stability. This coin is notable as it was Europe’s first CBDC project.
  5. e-peso - 20 million USD of Uruguay’s e-peso was issued to 10,000 Uruguayan citizens between 2017 and 2018, where it was used experimentally at registered businesses. Following the completion of the pilot study, it was cashed out and destroyed.

Wholesale/Interbank Projects

Interbank/wholesale applications restrict their use to financial institutions. Here are 3 leading current implementations. 

  1. Inthanon-LionRock - Started in 2017, this Hong Kong based CBDC demonstrated great potential in whole-sale/cross-border transactions. This CBDC will enhance the economic relationship between Thailand and Hong Kong, and is designed to position the city as a hub for offshore RMB payments. 
  2. Ubin - Ubin is Singapore’s blockchain-based CBDC. It is designed to facilitate transactions between different central banks in different countries. 
  3. Jasper-Ubin - This is actually two projects. These Canada-based CBDCs — Project Jasper and Project Jasper-Ubin — were started in 2017 and 2019 respectively. Both CBDCs focus on interbank payments, settlements, and cross-border/cross-currency payments.


The UK, and indeed much of the west, is still behind in its adoption of CBDC. Likewise, while promising, the efficacy of this technology has yet to be proven. One thing is certain however, CBDC has shown great promise in multiple applications. 

If new developments are anything to go by, future iterations will, all in likelihood, result in a government-backed digital currency in every nation, from the European Union (with its coming digital finance strategy legislation) to emerging economies like South Africa.

Whether they can live side by side with public blockchain-based stablecoins, and cryptocurrencies pegged in value to national currencies, remains to be seen. There is current concern that stablecoins are not fully backed 1:1 in fiat such as USD, which could result in a damaging liquidation run in the future. 

However, what should be of greater concern to every citizen and investor in the world right now is how CBDCs will be implemented. Will it be a governmental apparatus to hold greater influence on our finances, behavior, and freedoms, or will their cost benefits be passed down to citizens? Only time will tell. Considering the money-printing history of most central banks in the last 100 years, caution is indeed necessary.