CBDC in the Global Financial Revolution: Will They Push Out Cryptocurrencies?

Questions about the future of money are becoming increasingly urgent: Is CBDC the next step toward global financial transformation or a parallel system that will coexist with cryptocurrencies and traditional currencies? Over the past few years, more than 130 countries worldwide have begun researching or implementing central bank digital currencies, indicating the scale of this phenomenon. But how do they actually work, and how do they differ from decentralized alternatives?

What is CBDC and How Are They Changing the Financial System

CBDC (Central Bank Digital Currency) is a digital equivalent of a country’s fiat currency issued and regulated by the central bank. Unlike regular bank transfers, CBDC provides direct access to central bank funds in digital form.

The main advantage of CBDC lies in drastically reducing costs for producing, storing, and distributing physical cash. This seemingly simple idea opens the door to a revolution in payment systems. However, implementing this revolution requires complex technical and regulatory work.

How CBDC Works: From Concept to Practice

CBDC operates on principles similar to cryptocurrencies—they use a tokenized form of money. But here arises an interesting dilemma: is a blockchain necessary for CBDC? The answer is not straightforward. Some countries choose blockchain technology, while others implement digital registries that operate on similar principles but without a decentralized architecture.

For example, Brazil has chosen distributed ledger technology (DLT) for its CBDC DREX, while other countries are exploring hybrid approaches. This diversity of approaches reflects that there is no single recipe for a central bank digital currency.

The primary function of CBDC is to enable faster, safer, and more cost-effective digital transactions. However, the digital nature also creates new challenges: not all regions have sufficient infrastructure to use such services, especially in remote areas with limited internet access.

How CBDC Is Transforming the Traditional Financial System

CBDC transfers several key functions of cash into the digital space. They accelerate transactions, reduce fees, and expand financial inclusion—especially for unbanked populations. In countries with limited banking infrastructure, CBDC can be a pathway to formal economy.

For central banks, CBDC opens new possibilities for implementing monetary policy. They gain greater control over the money supply, can influence interest rates, and combat inflation more precisely. At the same time, this poses new challenges for banks: their role as intermediaries in payment systems could change significantly.

Commercial banks and payment systems feel this pressure. CBDC potentially reduces dependence on traditional intermediaries, which could impact their fee income and role within the financial system.

CBDC vs. Cryptocurrencies: Where Do Key Differences Lie?

At first glance, CBDC and cryptocurrencies seem similar—they are both digital currencies. However, their fundamental differences define completely different roles in the financial ecosystem.

Centralization vs. Decentralization

This is the root of all differences. CBDC is fully centralized and controlled by the state through the central bank. Government agencies have full control over issuance, supply, and management. This ensures monetary stability and allows for the implementation of government policy.

Cryptocurrencies like Bitcoin and Ethereum were developed precisely as a countermeasure to such centralization. They operate on decentralized networks where no single entity has absolute authority. Transactions occur directly between users via blockchain, without intermediaries.

However, reality is more complex: some aspects of cryptocurrencies can become centralized, especially when users store coins on exchanges. CBDC, by contrast, although inherently centralized, can include privacy elements for users.

Stability: The Main Advantage of CBDC

The value of CBDC is directly pegged to the national currency and remains stable. This makes it ideal for everyday transactions—from buying coffee to paying utility bills.

Cryptocurrencies, especially Bitcoin and Ethereum, are known for their volatility. As of February 2026, Bitcoin fluctuates around $67.66K, and Ethereum about $1.96K. This unpredictability impresses investors but makes cryptocurrencies impractical for daily payments. When a currency changes value by 5-10% in a day, planning expenses becomes difficult.

However, it is precisely this volatility that attracts speculators—potential high returns draw capital despite the risks.

Privacy and Anonymity: Different Goals

CBDC can offer varying levels of privacy depending on its design. Some systems prioritize user privacy, while others include audit features for oversight and to prevent illegal activities. Authorities may access data during investigations.

Cryptocurrencies are often considered anonymous, though this is only half true. While wallet addresses do not contain names, blockchain analysis methods can reveal identities through transaction patterns. Nonetheless, for most everyday users, cryptocurrencies offer a higher degree of privacy than traditional banking systems.

Global Progress of CBDC: From Sand Dollar to e-CNY

The global rollout of CBDC is impressive. From about 35 countries considering implementation in 2020, the number has grown to 130 nations. Nineteen G20 countries are at advanced stages of development.

Pioneers of CBDC

The Bahamas became the first in the world. In October 2020, they launched Sand Dollar—the first fully functional national CBDC. This decision proved essential: after Hurricane Dorian in 2019, the country faced major issues with physical payments in affected areas. Sand Dollar allowed residents to conduct transactions even when physical infrastructure was damaged. This demonstrates that CBDC can be a lifesaver not only in distant theoretical scenarios but also during real crises.

China took a significant step by launching e-CNY nationwide during the 2022 Winter Olympics in Beijing. China became the first major economy to do so. Moreover, the country has ambitious plans to internationalize the digital yuan, which could transform global settlements.

Australia is actively researching. Commonwealth Bank and ANZ Banking Group participate in a pilot program with the Reserve Bank of Australia to study eAUD. They are testing various use cases with other financial institutions.

Brazil is developing DREX (digital real) using distributed ledger technology. The system aims to streamline interbank transactions in the wholesale segment, with a planned launch by the end of 2024.

India launched a pilot project by the Reserve Bank of India in 2022. By June 2023, over 1.3 million users had downloaded a CBDC wallet, and about 300,000 merchants accepted digital rupee payments. This demonstrates massive demand for such systems in developing economies.

The USA is developing FedNow—a real-time payment system that could evolve into a CBDC in the future.

Nigeria issued eNaira, aimed at expanding financial inclusion in a country with over 200 million people.

CBDC and Stablecoins: Competition or Co-evolution?

A new force has appeared in the market—stablecoins. At first glance, they are very similar to CBDC, but this is a mistake.

Unlike CBDC, which are issued by central banks, stablecoins are issued by private organizations. A classic example is PYUSD from PayPal, developed to support blockchain initiatives. Stablecoins are created to minimize volatility through reserve assets.

This creates an interesting competition. Stablecoins offer a safe way to earn passive income, especially during bearish market conditions. At the same time, they are less regulated than CBDC, which draws resistance from authorities.

However, this is not necessarily a competition leading to one side’s victory. Both systems can coexist, serving different needs: CBDC for official payments and stability, stablecoins for innovation and yield.

The Future of Money: CBDC, Cryptocurrencies, or a Hybrid System?

Will CBDC replace cryptocurrencies? Unlikely. It’s like asking whether a train will replace a car—they serve different functions.

CBDC aims to regulate and control financial flows. Cryptocurrencies attract with their decentralization and absence of a central authority. These goals are fundamentally incompatible.

But will CBDC replace cash? While CBDC offers significant advantages, factors such as digital literacy, privacy concerns, and cybersecurity make a full replacement of cash unlikely in the near future. In many developing countries, cash will remain the primary means of payment for many years.

A more probable scenario is a layered financial ecosystem. CBDC will handle official payments and monetary control. Cryptocurrencies will remain for those valuing decentralization and speculation. Stablecoins will act as a bridge, offering innovation and yield. Fiat currencies in their traditional form will continue to exist for conservative users.

This diversity is not a weakness but a strength. Different tools for different purposes create flexibility and resilience to crises.

Conclusions: The Global Financial Transformation Has Already Begun

Central bank digital currencies (CBDC) are not the future—they are the present. About 130 countries are already moving in this direction, demonstrating governments’ awareness of the need for digital transformation of monetary systems.

However, CBDC will not replace traditional money or cryptocurrencies in the near term. Instead, we are witnessing the formation of a comprehensive ecosystem where CBDC, cryptocurrencies, stablecoins, and traditional currencies will have their respective niches.

The main challenge lies in coordination: how to regulate CBDC without maintaining total control? How to protect privacy in digital payments? How to ensure access for those still outside the digital infrastructure?

Regardless of the choices regulators make, one thing is clear—the future of money will not be straightforward. It will be diverse, technologically advanced, and radically different from what we know today.