The State of Central Bank Digital Currencies in 2025 and Beyond
Summary
This report provides an overview of the current state of CBDCs, first looking at the whole digital currencies market and the motivations for CBDC development. It discusses the distinction between wholesale and retail CBDCs as well as the complexities involved in managing retail CBDCs at scale. It also assesses the opportunities and challenges of CBDC implementation around four main domains: domestic payments innovation, cross-border efficiencies, financial inclusion, and monetary and financial stability. The report also discusses design considerations for wholesale and retail CBDCs. It finishes with a summary of key observations on the cryptocurrency and CBDC markets, as well as the near-term future outlook globally.
While the crypto market has not fully realized its initial vision of a decentralized financial system, it is now poised to enter mainstream use in the coming years. However, there is a risk of overheating in the crypto market leading to a speculative bubble. CBDCs will have a significant impact on payment innovation, financial inclusion, and stability, but there are challenges related to privacy protection, technical infrastructure, and interoperability with existing systems. Looking ahead, the success of CBDCs will depend on achieving a balanced design that fosters innovation without compromising stability or trust. As countries refine their CBDC pilots, the lessons learned will shape the global outlook on CBDCs, making collaborative efforts essential for realizing the promised benefits of CBDC adoption.
Scope
- Cryptocurrencies have the potential to go mainstream in 2025 on the back of expanding active use cases and facilitating networks, supported by increasingly favorable regulation.
- CBDCs fundamentally differ from cryptocurrencies, as CBDCs are national governments’ direct response to the emergence of private digital currencies (incl. cryptos) and other nations’ CBDCs, as these can carry monetary or social destabilizing risks.
- Wholesale CBDC is closer to realizing the real benefits than retail CBDC, given the more complex technical and regulatory requirements for the implementation of the latter.
- Although the interoperability of infrastructures remains the key challenge to tackle, successful CBDC implementation will equally depend on identifying and demonstrating tangible benefits for use.
- Understand the key differences between cryptocurrencies and CBDCs, between wholesale and retail CBDCs, and the opportunities and challenges of both.
- Gain a comprehensive overview of the current rate of crypto uptake and CBDC development globally and understand the reasons behind these trends.
- Identify any potential impact that a wider CBDC rollout could have on your business.
- Executive summary
- Digital currencies
- The globally shared vision of a new decentralized financial system pushed the cryptocurrency market to its current size and valuation
- The total cryptocurrency market hit $3 trillion following the 2024 US election
- Lack of financial inclusion drives cryptocurrency uptake in the developing world
- Use cases are set to become more active, as opposed to mostly passive investments
- Introduction to Central Bank Digital Currencies
- The current state of CBDC developments globally
- Role in the payment value chain
- Integrating individual consumers and merchants into the rCBDC payment value chain introduces greater complexity compared to wholesale operations
- Intended use cases differ for retail and wholesale CBDCs
- How CBDCs will fit in the current payment ecosystem
- Opportunities and Challenges of CBDC Implementation
- The four key areas where CBDCs could have an impact
- CBDCs promise payment efficiency gains
- Central banks will need to show tangible improvements in CBDC payments compared to the current systems in place, in order to achieve adoption
- Case study: Sand Dollar, DCash, JAM-DEX
- Cross-border money movements can be streamlined on scale with wCBDC
- rCBDCs could serve the growing remittances and international ecommerce markets
- Cross-border CBDC interconnectivity efforts are focused around bespoke projects
- Few central banks see connecting CBDCs as the best way to improve int. payments
- Case study: Digital euro
- Financial inclusion could be enhanced with a new payment system and tool that is primarily run and funded by the government
- Financial inclusion is at the forefront of rCBDC discussions in emerging economies
- The decade-long bank branch and ATM closure trend worsened the situation of those reliant on cash
- Barriers to entering digital payments range beyond just cost and access issues
- Central banks' worries around crypto's potential destabilizing effects led them to develop their own digital currencies
- Banking stability
- Payments stability
- Case study: eNaira
- CBDC Design Considerations
- The CBDC system has to rely on third-party providers
- Design considerations for a potential rCBDC
- Design considerations for a potential wCBDC
- Conclusions and Outlook
- Cryptocurrencies promise(d) financial independence and inclusion
- Although rCBDCs are mentioned more often, fully functioning wCBDC systems are more likely to be developed first
- Global CBDC outlook in the near term
- Appendix
- Methodology
- Appendix
Research Assistance
Learn how to effectively navigate the market research process to help guide your organization on the journey to success.
Download eBook