CBDC: it’s time to act

As the digital payments landscape continues to evolve at a rapid rate – driven largely by private-sector innovation – public currency must also evolve to maintain its relevance in the digital age. CBDCs present an opportunity for central banks to strengthen government-backed currency while maintaining trust, stability, and accessibility in the digital economy.

It is against this backdrop that a new report “CBDCs: It’s time for action” – published by OMFIF’s Digital Monetary Institute in partnership with G+D – explores why central banks should accelerate CBDC issuance. 

The report, drawing insights from a global survey and in-depth interviews with five senior central bank CBDC experts, takes stock of the current state of CBDC development, identifying current barriers to implementation and providing cause for optimism that CBDC issuance is finally within reach.

“It’s time to make the decisive step to create a public digital payment ecosystem with CBDC,” says Dr. Wolfram Seidemann, chief executive officer of G+D Currency Technology. “CBDCs hold significant potential for advancing the digital economy. By offering a public infrastructure, central banks can pave the way for innovative financial products and services, while reducing fragmentation in the financial system.”

Spotlight takes a look at some of the key takeaways from the report:

Evolving appetite for CBDC

While some central banks remain cautious about CBDC issuance, the overall trend is moving toward adoption. According to the report, 34% of central banks now expect to issue a CBDC within the next 3–5 years, up from 26% in the previous year, while the number of central banks planning issuance within 1–2 years has doubled to 12%.

For central banks that do not currently plan to issue a CBDC, little has changed. However, some respondents indicated they are closely monitoring developments, suggesting that policy stances may shift in the near future. At the same time, one-third of central banks have delayed issuance, citing legislation and unforeseen economic challenges, among other reasons. Political support remains a critical factor for establishing regulatory and governance frameworks.

Motivations for CBDC issuance differ by market. Developed economies primarily view CBDCs as a way to preserve monetary sovereignty in response to the increasing dominance of private-sector digital payments. In contrast, emerging markets prioritize financial inclusion, leveraging CBDCs to provide secure digital payment access to underbanked populations.

Despite optimism, concerns around adoption persist, particularly in emerging markets, where 56% of central banks cite this as a leading challenge. Efforts to mitigate this risk are underway. Brazil’s central bank is actively engaging the market to support platform maturity, according to Fabio Araujo, senior adviser at Banco Central do Brasil, while Wijitleka Marome of the Bank of Thailand emphasizes the need for preparedness and a deep understanding of adoption risks.

Technological barriers are no longer an obstacle

Given the variety of technological hurdles associated with designing and implementing CBDC, much of the conversation in recent years has centered around the simple question, “Can we?”

This year’s report indicates growing confidence that the answer is now “Yes.” In 2024, satisfaction levels with technological progress have risen significantly in three key areas: interoperability (38%, up from 12% in 2023), cybersecurity (35%, up from 12% in 2023), and offline payments (20%, up from 0% in 2023). 

Progress in areas previously considered major obstacles to CBDC development signals a clear shift in focus. With central banks now more assured in their ability to deliver secure and resilient CBDC infrastructure, attention is now turning to user experience and adoption.

The number of respondents identifying user experience as the most challenging feature has more than doubled to 27%. However, this does not imply that user experience design has become more difficult; rather, it reflects a shift in priorities as central banks move toward implementation. Nonetheless, central banks must ensure CBDCs deliver a seamless experience to encourage adoption.

Despite growing confidence in the ability to deliver on cybersecurity, this remains a leading concern in developed markets as CBDCs will introduce a major new piece of digital infrastructure, making them prime targets for cyberthreats. Security threats are constantly evolving and therefore require constant monitoring and adaptive security protocols to counter them, as well as sufficient communication to raise user awareness.

One emerging challenge is the potential threat posed by quantum computing and the subsequent transition to post-quantum cryptography  However, since the problem will threaten all digital systems, central banks will not be alone in addressing it. 

Ensuring interoperability is another task, as CBDCs will have to operate seamlessly with existing payments platforms. Regarding cross-border transactions, interlinking instant payment systems (IPSs) is currently the most promising solution for 47% of central bank respondents. However, while these systems have been successful domestically in countries such as Brazil and India, their potential as an effective cross-border solution is limited. IPSs typically rely on pre-funded accounts, which can limit liquidity and raise transaction costs, especially in less liquid currency pairs. Furthermore, IPS participation typically requires entities to hold full banking licenses.

CBDCs offer an opportunity to address these challenges, expanding participation, reducing liquidity issues and introducing advanced functionalities. As central banks consider options, CBDCs are the clear long-term play. 

Offline payments a driver for financial inclusion

Financial inclusion is the biggest motivation for CBDC issuance in emerging markets, with 44% percent of respondents (compared with 0% in developed markets) citing it as a major driver. CBDCs can bridge the gap to government-backed digital currencies for millions of underbanked or unbanked citizens living in remote regions – even if they don’t have access to a bank account or internet connection.

This is possible thanks to breakthroughs in offline payment functionality – considered the most challenging technical barrier just 12 months ago. Unlike mobile wallets or card-based transactions, which require continuous connectivity, CBDCs provide a cash-like digital experience, removing barriers to the digital payments ecosystem.

The Bank of Ghana tested the feasibility of offline payments as part of its eCedi pilot project.¹ Ensuring offline functionality was a key priority for enabling financial access for rural, off-grid communities traditionally excluded from the digital payments ecosystem.

The pilot successfully demonstrated the utility of an offline CBDC using G+D’s CBDC solution Filia^®, with both individual users and merchants reporting positive experiences.

Beyond financial inclusion, offline CBDCs can also strengthen operational resilience across all financial markets, providing a fail-safe mechanism during IT outages, natural disasters, or cyberattacks. The ability of CBDCs to operate independently of connectivity is a distinct advantage over current private alternatives. This resilience fosters trust in public money and supports the case for wider adoption of CBDC.

Central banks need to ensure monetary sovereignty

Although central bank money remains an important part of the global payment system, the decline of cash usage in favor of digital payments could lead to monetary system fragmentation, reduced stability and risks to users. As a result, 50% of central banks in developed markets are prioritizing CBDCs as a means of safeguarding the integrity of the financial system and monetary sovereignty. 

If central banks do not act, the future of digital payments will be dominated by private companies, whose primary interests are commercial rather than public. Private digital currencies, including stablecoins and crypto-assets, are slowly being integrated into mainstream payments, despite regulatory uncertainties and market volatility.

While not yet widely adopted for everyday use, stablecoins in particular are rapidly gaining ground, especially serving as a bridge between crypto and sovereign money. In the absence of a stable public alternative, this shift could reshape the payments landscape, posing risks to currency stability and the broader economy. 

CBDCs offer a useful counterbalance, providing a more secure, interoperable, and inclusive digital payment solution. Rather than dampening market innovation, however, CBDCs can adopt a complementary role, acting as a catalyst for innovation in the private sector and enhancing competition.

In doing so, central banks fulfill their mandate in safeguarding the financial system while actively shaping the future of digital payments. However, maintaining this role also requires addressing one of the most pressing concerns surrounding CBDCs: privacy.

According to the report, 82% of central banks recognize privacy as a key issue. As Dr. Alexandra Hachmeister, Director General Digital Euro at Deutsche Bundesbank, emphasizes, the industry has a “huge and difficult communication problem” in addressing public conceptions around this topic. Reassuring citizens that central banks will not have access to user data, nor will it be used for commercial or surveillance purposes, is a priority.

As the focus switches from feasibility to implementation, public-private collaboration will also be critical to successful issuance. CBDCs must integrate seamlessly into the digital economy to ensure both stability and innovation. A model where central banks provide CBDC as a common public foundation, while the private sector develops innovative financial products, will help shape an interoperable, inclusive, and efficient digital ecosystem. 

You can download the full report here.

Published: 27/03/2025