What Is a CBDC? Central Bank Digital Currency, Explained

Nigeria switched on the eNaira on 25 October 2021, and for a few weeks it looked like a hit. Half a million wallets were downloaded in 25 days. The next 100,000 took 63 days, and the 100,000 after that took another 143.

When IMF researchers went through the numbers in a working paper published in May 2023, they found about 860,000 retail wallets, equal to 0.8% of the country's active bank accounts, and estimated that 98.5% of them sat unused in any given week. The platform itself had run for a full year without an outage, a point the paper made by contrast with the Eastern Caribbean's DCash, which had been down for months.

So Nigerians had a working digital currency on their phones and mostly kept paying the way they already did. The other retail launches so far tell a similar story. None of this is financial advice.

What makes money a CBDC?

A central bank digital currency, or CBDC, is digital money that is a direct liability of the central bank, which is almost word for word how the Bank for International Settlements defined it in 2021, and cash already works like this. The Bank of England's 2023 consultation called a digital pound a direct claim on the Bank, as cash is today, worth the same as a banknote pound for pound.

A bank balance is different: deposits are created by commercial banks when they lend, they are those banks' liabilities, and they make up around 95% of the money UK households and businesses hold. Jamaica's central bank spells out what that means: if a company running a JAM-DEX wallet cannot pay, the Bank of Jamaica says it will, under certain conditions, reimburse 100% of the CBDC in that wallet directly.

There are two kinds: a retail CBDC is for households and businesses, like the eNaira, while a wholesale CBDC is for financial institutions settling with each other, so it never reaches a consumer's phone. One wholesale platform, mBridge, links the monetary authorities of China, Hong Kong, Thailand, the United Arab Emirates and Saudi Arabia. This guide is about the retail kind, because that is where the public arguments are.

How it differs from a stablecoin and from bitcoin

All three can sit in the same phone app. What differs is who, if anyone, owes you the money.

• A CBDC is owed by the central bank that issues the currency, and no separate reserve sits behind it, because it is the national currency in another form.

• USDC, like other fiat-backed stablecoins, is a private company's liability: Circle, its issuer, holds cash, short-dated US Treasuries and overnight repurchase agreements, much of it in a money market fund run by BlackRock. The US GENIUS Act, signed on 18 July 2025, sets a 100% reserve rule for coins like it, with monthly disclosure.

• Bitcoin is nobody's liability. No issuer owes holders anything, and the price moves with the market.

The stablecoin comparison is the closer one, since both aim at a fixed value in a national currency. The gap is the backstop: a central bank can create the currency it owes, while a stablecoin issuer has to hold enough assets to pay everyone back.

What happened where it launched

The Bahamas went first. A pilot began on Exuma on 27 December 2019, and the Sand Dollar was released nationwide through authorised financial institutions from 20 October 2020, the first retail CBDC to go national. By December 2023 the central bank reported B$1.7 million in circulation and 118,955 personal wallets in use. The IMF's January 2025 review put it at 0.4% of all currency in circulation, despite what the Fund called extensive marketing.

Jamaica minted its first J$230 million of digital currency on 9 August 2021 for a pilot, and JAM-DEX became legal tender when amendments to the Bank of Jamaica Act became law on 14 June 2022. That December, more than 100 workers on a government Christmas work programme were set up to receive wages in it, with over 70 small merchants onboarded to take it.

China runs the largest experiment by far, and some early tests came with expiry dates: on 12 October 2020, about 50,000 lottery winners in Shenzhen's Luohu district each got 200 digital yuan that had to be spent by 18 October. The e-CNY is still classed as a pilot, yet by the end of November 2025 it had processed 3.48 billion transactions worth 16.7 trillion yuan, roughly $2.37 trillion.

Then China changed what the e-CNY is. Since 1 January 2026, commercial banks have paid interest on e-CNY wallet balances, which deposit insurance covers, and officials called it a shift from a cash-like instrument toward digital deposit money.

Worldwide, the Atlantic Council's tracker counted 146 countries and currency unions exploring a CBDC in May 2026, up from 87 in May 2022. Three had fully launched one.

Where do Europe, the UK and the US stand?

The digital euro has a timetable and no law yet. The ECB's preparation phase ran from 1 November 2023 until October 2025, when its Governing Council moved the project to the next phase, aiming to be ready for a possible first issuance during 2029 if EU legislation is adopted in 2026.

The European Commission proposed that legislation in June 2023 and EU governments agreed their position on 19 December 2025. On 9 July 2026 the European Parliament voted 416 to 169, with 22 abstentions, to open negotiations with them, and talks began four days later. The ECB has meanwhile picked 36 payment service providers for a 12-month pilot due to start in the second half of 2027, running a beta version that will not be legal tender.

The UK has not decided. The Bank of England and HM Treasury consulted on a digital pound in February 2023, began a design phase in January 2024 and said a decision on next steps would come during 2026. As of late September 2026, the Bank's own digital pound page still said no decision had been made, and any launch would first need an Act of Parliament.

The United States has gone the other way. An executive order signed on 23 January 2025 barred federal agencies from any action to establish, issue or promote a CBDC and ordered existing plans terminated, saying CBDCs threaten financial stability, individual privacy and US sovereignty. A standalone bill to ban one passed the House on 17 July 2025 by 219 votes to 210, but the ban that reached the statute book came inside a housing package instead. The 21st Century ROAD to Housing Act, law since 11 July 2026, bars the Federal Reserve from issuing a CBDC until 31 December 2030, except for dollar currency that is "open, permissionless, and private".

The arguments that shape the design

Most of the debate comes down to four settings, and none of them is really technical.

Privacy: the ECB says offline digital euro payments would offer cash-like privacy, with only payer and payee knowing the details. Online, it says it could not connect a payment to a person, because payment providers would pass on pseudonymised data. The Bank of England and HM Treasury have said neither would have access to personal data, while the US order named privacy among its reasons for the ban.

Holding limits: caps are there to stop money leaving bank deposits too fast, particularly in a crisis. The UK's 2023 consultation proposed £10,000 to £20,000 per person, and its own analysis said £10,000 would accommodate the salaries of 75% of UK earners and £20,000 those of 95%. In the EU, governments want the ECB to set the cap below a ceiling they agree and review at least every two years. At lawmakers' request, the ECB modelled caps of up to €3,000 per person in October 2025, stressing that these were not its view of the right level.

Interest: the digital euro would pay none, the UK proposal said the same of a digital pound, and the Bank of Jamaica tells users they earn nothing on JAM-DEX, just as with cash. China's e-CNY is now the exception, and interest makes a CBDC compete more directly with bank deposits, the very thing the caps elsewhere are meant to limit.

Offline use: paying phone to phone with no connection is the feature that brings a CBDC closest to a banknote. The digital euro would keep offline payment data in a secure element on the device, out of reach of the Eurosystem and payment providers, and the ECB's pilot includes offline payments between central bank staff.

Each of those settings has to be fixed in statute or a central bank rulebook before anyone holds the currency. In the EU, the UK and the US alike, no retail CBDC can be issued without a law that allows it.