More than 80% of the world’s central banks are exploring digital currencies, according to a 2024 survey by the Bank for International Settlements. Of the 86 central banks surveyed, 94% were engaged in some form of CBDC research, and more than 60% were in advanced stages of development or pilot testing. China’s digital yuan has processed more than $250 billion in cumulative transactions since its pilot began in 2020, making it the most deployed CBDC in the world, according to the People’s Bank of China.
Why Central Banks Are Moving to Digital Currencies
Declining cash usage is the primary motivator. In Sweden, cash transactions fell below 8% of all payments in 2024, according to the Riksbank. In China, mobile payments account for more than 85% of consumer transactions. Central banks are concerned that as cash disappears, they will lose their direct connection to the payments system. A CBDC preserves the central bank’s role as the provider of public money in a digital economy.
Financial inclusion is a second driver. More than 1.4 billion adults remain unbanked globally, according to the World Bank‘s 2024 Global Findex database. CBDCs could provide these populations with access to digital payments through mobile phones without requiring a traditional bank account. The Bahamas launched the Sand Dollar, the world’s first CBDC, in 2020 specifically to serve island communities with limited bank branch access.
Competition from private digital currencies also motivates central banks. Facebook’s announcement of the Libra stablecoin project in 2019 accelerated CBDC development worldwide. Although Libra was ultimately abandoned, the threat that a private company could create a parallel monetary system pushed central banks to act. The growth of stablecoins like USDT and USDC, which collectively manage more than $170 billion, demonstrates the demand for digital money. Fintech revenue growing at a 23% CAGR is partly driven by this shift toward digital monetary infrastructure.
Where CBDCs Are Being Deployed
China is the clear leader. The digital yuan pilot expanded from four cities in 2020 to 26 cities by 2024. More than 260 million digital yuan wallets have been created, according to the PBOC. The currency is being used for retail payments, government salary distributions, and transportation. China used the digital yuan at the 2022 Beijing Winter Olympics, allowing foreign visitors to make payments through e-CNY wallets.
India launched the digital rupee pilot in December 2022. The Reserve Bank of India reported that more than 5 million retail digital rupee transactions had been processed by the end of 2024 across 13 cities. The digital rupee operates through commercial bank apps and supports both online and offline payments. India’s existing success with UPI, which processes more than 13 billion transactions monthly, provides a foundation for CBDC adoption.
The European Central Bank is developing the digital euro. A two-year investigation phase concluded in October 2023, followed by a preparation phase that will run through 2025. ECB President Christine Lagarde has stated that the digital euro could be ready for launch by 2028. The digital euro would complement cash, not replace it, and would be available to all eurozone residents through commercial banks. Digital banking customer growth toward 3.6 billion will accelerate as CBDCs create new digital payment options.
Technical Architecture and Design Choices
CBDCs generally follow one of two models. Retail CBDCs are designed for public use, functioning as digital cash for everyday transactions. Wholesale CBDCs are restricted to financial institutions and used for interbank settlement. Most central banks are pursuing retail CBDCs, though several, including the Banque de France and Swiss National Bank, have conducted wholesale CBDC experiments.
The technology varies. China’s digital yuan uses a centralised database controlled by the PBOC, not a blockchain. Nigeria’s eNaira and the Eastern Caribbean DCash use permissioned blockchains. The Bank of England’s digital pound design favours a centralised core ledger with API access for private sector wallet providers.
Privacy is a major design consideration. The ECB has proposed limiting transaction data collection, with transactions below a certain threshold being fully anonymous. China’s digital yuan uses “controllable anonymity,” where small transactions can be anonymous but larger ones require identity verification. The US Federal Reserve has stated that any digital dollar would need congressional authorisation and would have to protect consumer privacy. Fintech unicorn growth from 20 to over 300 includes companies building wallet and infrastructure solutions for CBDC deployment.
Implications for the Financial System
CBDCs could disintermediate commercial banks. If consumers can hold money directly at the central bank, they may withdraw deposits from commercial banks, reducing the funds available for lending. The ECB has proposed a 3,000 euro holding limit on digital euro balances to prevent this effect. The Bank of England has suggested a similar cap of 10,000 to 20,000 pounds.
Cross-border CBDC payments could reshape international finance. The BIS Innovation Hub’s mBridge project, involving the central banks of China, Hong Kong, Thailand, and the UAE, has demonstrated that CBDCs can settle cross-border payments in seconds instead of days. If mBridge scales, it could reduce dependence on the US dollar-based correspondent banking system.
The 80% figure for central banks exploring CBDCs understates the momentum. Fintech companies capturing banking revenues and central banks building digital currencies are parallel developments that point in the same direction: the digitisation of money itself. By 2030, some form of CBDC is likely to be operational in countries representing more than 95% of global GDP, according to the Atlantic Council’s CBDC tracker. The structural trends driving this shift show no signs of reversing. As digital infrastructure matures and consumer expectations move toward faster, cheaper, and more transparent financial services, the competitive pressure on legacy systems and traditional operating models will only increase. The companies and institutions that adapt to this reality earliest stand to capture a disproportionate share of the market over the coming decade.
Implications for the Broader Market
The data points covered in this analysis reflect broader structural shifts in how financial services are built, delivered, and consumed. Technology-driven platforms are not simply adding digital channels to existing business models. They are fundamentally restructuring the cost base, speed, and accessibility of financial products.
For established financial institutions, the strategic question is no longer whether to invest in digital capabilities but how aggressively to pursue transformation. Half-measures, such as building mobile apps on top of legacy core systems, produce marginal improvements at best. The institutions seeing the strongest results are those that have committed to full-stack modernisation, including cloud migration, API-first architectures, and automated compliance systems.
For investors, the valuation gap between digitally mature and digitally lagging financial institutions will continue to widen. Markets increasingly reward operational efficiency, scalability, and data-driven decision-making. The firms that lead on these dimensions will attract capital at lower costs and deploy it more effectively.
