What is a central bank digital currency (CBDC)?
A CBDC would put central bank money, today available to the public only as notes and coins, into a digital wallet. Most central banks are studying the idea; very few have gone live.
Education only, not investment, tax or legal advice. Crypto-assets are high-risk — risk disclosure.
The short answer
A central bank digital currency (CBDC) is digital money that is a direct liability of a country's central bank, like a banknote in electronic form. Retail CBDCs would be for everyday payments by the public; wholesale CBDCs are for settling transactions between banks and other financial institutions.
Key takeaways
- A CBDC is a digital claim on the central bank itself, unlike a bank deposit (a claim on a commercial bank) or a stablecoin (a claim on a private issuer).
- Retail CBDCs are for households and businesses; wholesale CBDCs are for settlement between financial institutions.
- In a 2024 BIS survey, 91% of 93 central banks were exploring a CBDC, but only three had launched a live retail one: The Bahamas, Jamaica and Nigeria.
- The ECB aims to be ready for a possible first issuance of a digital euro during 2029, if EU legislation is adopted in 2026.
- In the US, a January 2025 executive order bars federal agencies from working to establish a CBDC.
What exactly is a CBDC?
Today, the only central bank money ordinary people can hold is cash. The money in your bank account is a promise from a commercial bank, and in the UK it is by far the larger share: the Bank of England counts bank deposits at about 79% of money and notes and coins at about 3%6. A central bank digital currency would give the public a digital claim directly on the central bank.
The Federal Reserve's 2022 discussion paper defines a CBDC as a digital liability of a central bank that is widely available to the general public2. A 2025 US executive order uses a similar definition: digital money, denominated in the national currency, that is a direct liability of the central bank4. The European Central Bank describes its proposed digital euro as a digital form of cash, issued by the central bank and available to everyone in the euro area3.
Four kinds of money compared
| Money | Who owes it | Form |
|---|---|---|
| Cash | Central bank | Physical notes and coins |
| Bank deposit | Commercial bank | Digital account balance |
| Stablecoin | Private issuer | Token on a blockchain |
| Retail CBDC | Central bank | Digital wallet or account |
What is the difference between a retail and a wholesale CBDC?
The BIS separates two kinds. A retail CBDC is a digital version of cash that households and firms can use for everyday transactions1. A wholesale CBDC is tokenised central bank money used as a settlement asset between banks, central banks and other financial institutions1. Most people would only ever touch the retail kind.
Figure · Retail versus wholesale CBDC
Retail CBDC
- Used by the public
- Everyday payments
- Digital version of cash
Wholesale CBDC
- Used by financial firms
- Settles large transactions
- Tokenised central bank money
According to the same 2024 survey, central banks' work on wholesale CBDCs is, on the whole, at a more advanced stage than their work on retail ones1. The BIS's wider vision links wholesale central bank money with tokenised bank deposits and assets on a shared programmable platform it calls a unified ledger5, which our explainer on tokenisation covers.
Which countries have launched a CBDC?
Interest is wide but launches are rare. Of 93 central banks in the BIS's 2024 survey, 91% (85) were exploring a retail CBDC, a wholesale CBDC or both1. Only three had launched a live retail CBDC: in The Bahamas, Jamaica and Nigeria1.
The euro area is moving step by step. The Eurosystem began an investigation phase in October 2021 and a preparation phase on 1 November 20237. In October 2025, the ECB's Governing Council decided to move the digital euro project to its next phase3. The ECB aims to be ready for a potential first issuance during 2029, assuming EU legislation is adopted in the course of 20263. It says a digital euro would complement cash rather than replace it3.
The United States has gone the other way. The Federal Reserve said in 2022 that it did not intend to issue a CBDC without clear support from the executive branch and Congress, ideally through a specific law2. On 23 January 2025, Executive Order 14178 prohibited federal agencies, except where required by law, from taking any action to establish, issue or promote a CBDC in the US or abroad4.
Figure · Milestones in the CBDC debate
- Jan 2022Fed paper
- Nov 2023Digital euro prep phase
- Jan 2025US order bars CBDC work
- Aug 2025BIS survey: 91% exploring
- Oct 2025Digital euro: next phase
- 2029Possible launch
Why do central banks want a digital currency?
The BIS survey points to one recurring motive: keeping central bank money relevant as cash use declines and traditional assets are increasingly tokenised1. Private digital money is part of the picture too. More than one in three jurisdictions said they had sped up CBDC work because of developments in stablecoins and other crypto assets1.
Design promises also matter. For the digital euro, the ECB says basic use would be free of charge, payments could be made online or offline with a phone or card, and the Eurosystem would not be able to identify who you are or what you buy from the payment data it receives3.
How a retail CBDC payment could work in an intermediated model
- 1
Open a wallet with a provider
Under the model described by the Fed, banks and regulated non-bank firms would offer CBDC accounts or wallets2.
- 2
Fund it
Move money from your bank account into the wallet, swapping a bank deposit for central bank money.
- 3
Pay
Pay a shop or a friend from the wallet; the money moves as a claim on the central bank, not on your bank.
- 4
Cash out
Move the balance back to a bank account whenever you want.
What are the risks of a CBDC?
The main worry for banks is competition for deposits. The Fed's paper notes that a widely available CBDC would be a close substitute for commercial bank money, and a near-perfect one if it paid interest, which could reduce the total amount of deposits in the banking system2. It also warns that being able to convert bank deposits into CBDC quickly could make runs on financial firms more likely or more severe2.
One answer under study is a cap on how much each person can hold. The BIS found that many jurisdictions are considering holding limits for a potential retail CBDC: 56% of advanced economies and 63% of emerging market and developing economies1. Privacy is the other big debate, which is why the ECB stresses what data it would and would not see3.
Risk warning
Beware of fake 'CBDC' tokens
A CBDC is national currency, not an investment: it is denominated in the national unit4, so one digital euro would simply be one euro. Offers to get in early on a CBDC, or coins that claim central bank backing, are classic warning signs of a scam. See our risk disclosure.
What do people get wrong about CBDCs?
Common beginner mistakes
Confusing a CBDC with a stablecoin
A stablecoin is a private company's token. A CBDC would be a direct liability of the central bank2.
Thinking CBDCs are already everywhere
Only three live retail CBDCs existed at the time of the 2024 BIS survey1.
Assuming a CBDC replaces cash
The ECB says the digital euro would complement banknotes and coins3.
Calling bitcoin a digital currency like a CBDC
Bitcoin has no issuer that owes you anything. A CBDC is a claim on a central bank, denominated in the national currency4.
Frequently asked questions
Is a CBDC a cryptocurrency?
Not in the usual sense. A CBDC is issued by a central bank and denominated in the national currency4, so one unit is always worth one unit of that currency. Its value is not set by trading.
Will the US launch a digital dollar?
Would a CBDC pay interest?
That is a design choice. The Fed's paper notes that an interest-bearing CBDC would be an even closer substitute for bank deposits, which is one reason the question is sensitive2.
Could the central bank see all my payments?
It depends on the design. For the digital euro, the ECB says it would not be able to identify users or what they buy from the payment data it receives3.
When could a digital euro arrive?
The ECB aims to be ready for a potential first issuance during 2029, provided EU legislation is adopted during 20263.
The bottom line
A CBDC is central bank money in digital form, a direct claim on the central bank rather than on a commercial bank or a private issuer. Most central banks surveyed by the BIS are studying the idea, three have launched a retail version, the euro area is preparing for a possible 2029 start and the US has ruled one out for now. The real debates are about privacy, holding limits and what happens to bank deposits.
Sources
- Advancing in tandem: results of the 2024 BIS survey on central bank digital currencies and crypto (BIS Papers No 159) — Bank for International Settlements, 2025 Primary source
- Money and Payments: The U.S. Dollar in the Age of Digital Transformation — Board of Governors of the Federal Reserve System, 2022 Primary source
- Digital euro — European Central Bank Primary source
- Executive Order 14178: Strengthening American Leadership in Digital Financial Technology — Federal Register (Executive Office of the President), 2025 Primary source
- Annual Economic Report 2025, Chapter III: The next-generation monetary and financial system — Bank for International Settlements, 2025 Primary source
- How is money created? — Bank of England, 2019 Primary source
- Eurosystem proceeds to next phase of digital euro project — European Central Bank, 2023 Primary source
How we checked this page: every figure above links to the numbered source it came from. Spotted an error? Tell the desk — see our editorial policy.
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