What is a CBDC ?

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A Central Bank Digital Currency is an innovative, digital form of national money issued by a central bank that individuals and businesses can use to trade and make payments. It is different from a reserve, a bank deposit, and physical cash.

History of cash

Historically, central banks have provided notes and coins to the public to act as a medium of exchange, a unit of account and a store of value – as part of a government’s policy objectives. Payments are an essential public service, protected by legal tender laws.

But as cash use has been shown to be declining [1], households or businesses may no longer have access to direct central bank money. Today, many choose the convenience of paying with credit/debit cards, phones, or online banking. Each time we do this, we create data, share valuable personal information, and become more dependent on private payments systems or commercial banks, raising questions over the control of the supply of money.

The only central bank-issued digital money are reserves, unavailable to the public. As European Central Bank President Christine Lagarde stated [2] :

“We have a responsibility to ensure that our citizens have choice and cannot be excluded from the payments ecosystem due to the actions of others.”
european central bank logo
Christine Lagarde
European Central Bank President

So, what are CBDCs?

CBDCs are a new form of central bank-issued, universally accessible electronic currency. They can provide increased payment system security, financial stability and regulation, trade efficiencies, and financial inclusion for underserved citizens.

They come in various forms, including:

These can feature a digital ledger that can use technology like a blockchain.

CBDCs require the building of new infrastructure: databases, networks, apps, wallets, and so on. While novel, a well implemented CBDC can streamline financial plumbing and maintain the usability of modern payment infrastructure.

How CBDC relates to the existing monetary system

This graph from Berg, 2017, illustrates how CBDC relates to the existing monetary system and the elements of cash, reserve money and bank deposit money.

Common misunderstandings of CBDCs

• CBDCs aren’t based on unstable digital assets, commonly but inaccurately referred to as ‘cryptocurrencies’

• They are governed centrally rather than by autonomous individuals

• They are different from stablecoins, pegged to the national currency

• CBDCs can support offline, instantaneous peer-to-peer payments

• They integrate seamlessly with existing systems, including physical cash

A short history of CBDCs

CBDCs are a rapidly emerging area of interest for businesses and governments. Consumer behaviour around the use of cash has changed, and people are more familiar with paying for goods using their smartphones.

In emerging markets especially, mobile money is a popular alternative to decreasing cash dependency. Covid has caused a rapid digitisation globally of different economic sectors, and recent technological milestones, notably the Bitcoin white paper in 2008, have made the concept of CBDCs more feasible than ever.

The last two years have seen a flurry of papers, reports, and roadmaps on CBDCs from the Bank of England, the European Central Bank, the G7, and more. Over 100 governments have investigated CBDCs – or are currently doing so – with nearly 40 that have an active proof of concept or currency.

Frame 17

At nChain, we are working with central banks to research and design a truly more resilient, trusted and inclusive modern economy, securing the livelihoods and prosperity of citizens for generations to come.

Interested to learn more about CBDCs? Download the Playbook or sign up to be the first to know about our CBDC Masterclass below.

CBDC Playbook


This 40-page comprehensive guide will help you understand how CBDC programs can be designed and implemented, and some of the key questions that need to be addressed to help ensure a successful CBDC implementation.

CBDC Masterclass Series


The nChain CBDC Tech Masterclass Series aims to provide both foundational principles, expert opinion and lively discussion around the technical considerations of CBDC and creating a more resilient payments system for all.

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