Rise of CBDCs

The Rise of CBDCs And Their Anticipated Face-Off With Cryptocurrencies. What’s Happening?

Antier Solutions
5 min readAug 6, 2021


The world’s major central banks are now proactively considering the issuance of their digital currencies that are known as Central Bank Digital Currencies (CBDCs). Undeniably, CBDCs have stepped into the limelight recently and are here to stay. The PwC CBDC Global Index April 2021 report which monitors the ongoing transformation going on in the CBDCs space globally strongly supports the last statement.

PwC is closely monitoring the ongoing trends around CBDCs. According to their latest reports, over 60 Central Banks across the globe are exploring CBDCs. Interestingly; many CBDC projects have now entered the implementation phase.

Bank of America (BoA), the second-largest bank in the U.S. recently stated that CBDCs are a much more effective payment system than cash and hold the potential to completely replace it in the future.

Currently, central banks are developing two different types of operational models for digital currency and some projects are live now.

Retail CBDCs

This is a digital currency held by citizens. It is a form of digital cash and individuals and businesses can use retail CBDCs for payments, the way they use regular currencies (fiat) today.

As per PWC, banks in emerging economies are accelerating the CBDCs development to promote digitization and financial inclusion.

Live Retail CBDC projects:

● Project Sand Dollar (Bahamas)

● Project Bakong (Cambodia)

● Mainland China’s Project Digital Yuan is already live and processes transactions worth USD 300 million.

Moreover, the Beijing 2022 Winter Olympics will use Digital Yuan.

The motive behind launching Retail CBDC

Financial inclusion
In emerging economies, a good percentage of citizens do not have physical access to banks or physical cash. However, they do have access to mobile devices that are sufficient to use CBDCs.

Thus, the use of CBDCs will lead to the financial inclusion of such citizens.

Improved monetary policy
CBDCs are being developed using blockchains that provide transparency and immutability to the records. As a result, central banks will have more control over distribution and tax transactions.

Globalization with digital innovation
With the use of CBDCs, central banks would be able to provide global services with ease and compete at a global level.

Wholesale CBDCs

Also known as advanced Interbank CBDCs, these facilitate interbank settlement. Although no wholesale CBDC project is live, most of them are in the advanced pilot stage. These advanced pilot initiatives revolve around cross-border projects such as the connectivity between United Arab Emirates-Saudi Arabia, Singapore-Canada, Hong Kong SAR-Thailand, and Europe-Japan.

The motive behind launching Wholesale CBDC

Interbank payment settlement
The existing interbank payment settlements are vulnerable to risks like overnight batch processing and collateralization. With CBDCs, the interbank settlements will happen almost instantly.

Overcome credit risks

The use of CBDCs will allow individuals, private organizations, and non-bank financial institutions to pay directly in central bank money instead of bank deposits. This might help reduce credit risk in the payment systems.

Cut the cost
Over the years, bodies like SEPS have drastically reduced the real-time money transfer costs. However, still many financial institutions continue to charge hefty cross-border settlement fees. CBDCs will change this as the cost of transferring CBDCs is low and transfers happen near instantly.

Interestingly, almost 70% of the announced wholesale projects are already running pilots. However, in the retail CBDC category, only 23% have reached the implementation stage.

How are CBDCs different from regular cryptos?

From a macro perspective, Central bank digital currencies (CBDCs) are cryptocurrencies with more restrictions and limitations. This is because CBDCs will always be under the control of central banks. The central banks will control how many CBDCs get printed, they will always know who owns how many CBDCs and more. This takes away the essence and advantage of the whole concept of decentralized money.

Infrastructural difference

Central bank digital currencies (CBDCs) are operated by a central bank. Effectively, they will use private blockchains to limit access and interaction with outside elements. On the other hand, cryptocurrencies like bitcoin are hosted on public and permissionless blockchain networks with access to everyone.

Purpose of existence

Central banks will issue CBDCs only for payments. On the other hand, cryptocurrencies like bitcoin, UNI, Matic, and all can have more purposes than a just store of value. like governance, for reducing transaction fees, and more. More importantly, CBDCs cannot be used for speculative purposes because their price will not fluctuate like Bitcoin and Ethereum. They will be more like a stablecoin issued by central banks.

Supply Limitation

Cryptocurrencies will always have a capped supply and this cannot be changed without the consensus of the blockchain users. On the other hand, central banks could mint as many CBDCs as they want.

Anonymous holdings

Cryptocurrency users can enjoy anonymity and privacy. However, CBDC users will always have to disclose their identity details and holding to the central banks.


CBDC infrastructure wins hands down in scalability because they run on permissioned or private blockchains. On the contrary, crypto blockchains such as Ethereum have faced terrible network clogging due to scalability demands.

Will they influence the overall crypto market?

With cryptocurrencies gaining immense popularity, central banks are becoming nervous and accelerating their CBDC implementation plans.

To encourage adoption and to pave the way for CBDCs, some governments are tightening the reins on traditional crypto. The recent regulatory crackdown of mining operations in China is just a glimpse of what traditional crypto might have to face ahead.

This could affect the crypto market price movements and development in the short term only. That is because CBDCs have some associated risks that no one seems to be talking about.

Risks associated with CBDCs

Firstly, to avoid deposit base deprivation, central banks will impose caps on user balances and plan to pay no interest on CBDC. In addition to this, if an account holds CBDC beyond a certain threshold, it might even attract a penalty.

Secondly, central banks will not allow any anonymous transactions and will hire intermediaries to monitor all activities.

While CBDCs propose to solve the problems of financial exclusion but in reality, it might not happen. To ensure financial inclusion, central banks must make it accessible to everyone irrespective of credit history or their records. Herein lies the challenge, central banks need to work within the guidelines of FATF standards and they will continue to exclude certain users who have previously been involved in illicit activities. It seems CBDC won’t be able to keep its promise of financial inclusion.

Moreover, it provides less privacy than cash and this could deter their public adoption.


There’s no doubt that digital currencies issued by central banks will resolve the issues of the existing fiat money. Not only will they push the millions of people towards digitization but will also ensure swift and secure transactions. At the same time, the crypto continuum will continue and more businesses will embrace blockchain. No matter CBDCs was introduced to compete with private currencies, they are unlikely to have any direct impact. In fact, this is an exciting time for the global economy wherein multiple services (private & public) compete for the consumer’s delight.

What do you think?



Antier Solutions

Decentralizing the world since 2016 through full-stack custom blockchain solutions. Follow this space for DeFi, DAO, NFTs, Metaverse, Crypto Exchanges & more.