What is a central bank digital currency (CBDC)?

What exactly is a CBDC?

Today you can hold money in two broad forms. Banknotes are issued by the central bank. Money in your current or checking account is a deposit, a promise from a commercial bank. Most everyday digital payments move that commercial bank money.

A CBDC would be a third form: digital, like a bank balance, but owed by the central bank, like cash. The Federal Reserve puts it simply: a CBDC would be a liability of a central bank such as the Federal Reserve, unlike the digital money people already hold in private bank accounts. A January 2025 US executive order uses a similar definition: digital money denominated in the national unit of account that is a direct liability of the central bank.

How is a CBDC different from bank money and stablecoins?

A stablecoin is designed to track a currency, but it is issued by a private company or protocol. A CBDC is the currency, in digital form. Central banks also distinguish retail CBDCs, for the public, from wholesale CBDCs, used between banks and other financial institutions. According to the BIS survey, exploration of wholesale CBDCs is further along overall than retail.

Which countries have a CBDC?

Many central banks are studying the idea; far fewer have launched one. The Bank for International Settlements' 2024 survey, published in August 2025, found that 85 of 93 central banks (91%) were exploring a retail CBDC, a wholesale CBDC or both, and that over a third had sped up their work in response to stablecoins and crypto-assets.

• The Bahamas. The Central Bank of The Bahamas describes the Sand Dollar as a digital version of the Bahamian dollar. Its national rollout began on 20 October 2020 after pilots in Exuma and Abaco, distributed through authorized financial institutions with tiered wallets and anti-money-laundering checks.
• Euro area. The European Central Bank describes the digital euro as a digital form of cash available to everyone in the euro area. In October 2025 it moved to the next phase, with a pilot planned for 2027 and a possible first issuance in 2029, assuming EU legislation is adopted in 2026.
• United States. An executive order signed on 23 January 2025 bars federal agencies from taking action to establish, issue or promote a CBDC, except as required by law, and ended ongoing agency plans.

What are the arguments for and against a CBDC?

The Federal Reserve's discussion of a possible US CBDC listed potential benefits such as a safe digital payment option for households and businesses and faster cross-border payments. It also listed the questions any design must answer: protecting monetary and financial stability, protecting citizens' privacy and keeping the ability to fight illicit finance. The Fed's paper did not favor any policy outcome.

Design choices decide where a CBDC lands on these trade-offs. The ECB, for example, says it would not be able to identify who you are or what you buy from the payment data it receives, that basic use would be free, and that payments would work online or offline by phone or card. The Bahamas' tiered wallets put lower limits on low-value personal wallets. In the US, the 2025 executive order settled the policy question for federal agencies.

What mistakes do people make about CBDCs?

• Calling any government-linked crypto a CBDC. A CBDC must be issued by the central bank and be its liability. A token issued by a company or a state agency is something else.
• Confusing CBDCs with stablecoins. One is central bank money; the other is a private promise. See types of stablecoins.
• Assuming a CBDC must run on a blockchain. The definition is about who issues the money, not the technology underneath.
• Falling for "CBDC investment" offers. A CBDC is the national currency in digital form; it is not an investment with returns. Treat any offer to "buy early" as a red flag; see common crypto scams.