A central bank digital currency, or CBDC, is electronic money issued directly by a country’s central bank and designed to work alongside physical cash. The United States does not have one. A January 2025 executive order prohibits federal agencies from creating or circulating a CBDC inside U.S. jurisdiction, and a bill that passed the House in July 2025 would turn that prohibition into statute. As of mid-2025, 137 countries representing 98 percent of global GDP are studying the idea, three have launched a retail version, and 49 pilot programs are running worldwide.
How a CBDC Differs From the Money in Your Bank Account
The dollars sitting in your checking account are not actually at the Federal Reserve. They are a liability of your commercial bank: the bank owes you that money, and if the bank fails, you rely on FDIC insurance to recover it. A CBDC inverts that relationship. The central bank itself owes you the money, which makes a CBDC the digital equivalent of a banknote rather than a bank deposit.1Federal Reserve. What is a Central Bank Digital Currency?
That distinction matters because a central bank, as the entity that creates the national currency, cannot run out of its own money the way a commercial bank can. The Federal Reserve currently recognizes two forms of central bank money: physical bills and coins, and the digital balances that commercial banks themselves hold at the Fed. A CBDC would create a third form, giving ordinary people direct access to central bank money in digital form for the first time.2Federal Reserve. Central Bank Digital Currency (CBDC) – Frequently Asked Questions
Existing digital payments through apps, debit cards, and bank transfers move commercial bank money around. A CBDC would move central bank money around. Deposit insurance becomes irrelevant for CBDC holdings, because the issuer stands behind every unit and cannot become insolvent. The tradeoff: most CBDC proposals pay no interest, or very little, whereas commercial banks compete for deposits by offering a return.
Retail CBDCs and Wholesale CBDCs
Central banks exploring the idea have landed on two broad designs depending on who gets to use the currency.
A retail CBDC is for everyday people. You would hold it in a digital wallet on your phone and use it to pay for groceries, send money to family, or settle a bill. It functions like digital cash: issued by the central bank, usable by anyone, and intended to work the way physical banknotes do but in electronic form. Countries pursuing retail CBDCs are typically trying to reach people without traditional bank accounts, or to reduce dependence on private payment networks that charge transaction fees.
A wholesale CBDC never touches ordinary consumers. It exists for transactions between banks and other large financial institutions, replacing the behind-the-scenes plumbing that settles interbank transfers and securities trades. The appeal is speed and finality. A wholesale CBDC can settle a large cross-border transfer in seconds rather than the one-to-three days correspondent banking typically requires. Most of the 49 active pilot programs worldwide focus on wholesale applications, because they involve fewer participants and less regulatory complexity.
Project mBridge, a joint effort by the central banks of China, the UAE, Thailand, and Hong Kong, reached its minimum viable product stage in mid-2024 and showed that distributed-ledger wholesale CBDCs could compress cross-border settlement from days to seconds. The Bank for International Settlements, which co-developed the platform, handed it over to the central bank partners in October 2024.3Bank for International Settlements. Project mBridge Reached Minimum Viable Product Stage
What a CBDC Can Do That Existing Digital Payments Cannot
Most of the practical features people imagine when they hear “digital money” already exist. Venmo, Zelle, debit cards, and bank apps all move money electronically. A CBDC adds a few capabilities that the current infrastructure does not have.
The first is offline use. A card payment stops working when the network goes down. Central banks have invested significant effort in offline CBDC payments that let two devices complete a transaction without any internet connection, then reconcile with the central ledger once connectivity returns. The leading approach uses tamper-resistant hardware similar to the chip in a credit card, embedded in phones or dedicated payment cards, with transfers happening over short-range links like NFC or Bluetooth.4Bank for International Settlements. Project Polaris: Handbook for Offline Payments With CBDC
The second is throughput. Existing card networks handle thousands of transactions per second during peak periods. Project Hamilton, a joint research effort by the Federal Reserve and MIT, demonstrated a CBDC architecture capable of processing 1.7 million transactions per second, suggesting the engineering problem is solvable even at national scale.5U.S. Department of the Treasury. The Future of Money and Payments
The third is programmability, and this is where enthusiasm from central bankers meets alarm from critics. Because every unit of a CBDC exists on a ledger controlled by the issuer, rules can be attached to the money itself. Funds could expire if not spent within a certain period. Spending could be restricted to approved merchants or geographic areas. Specific purchase categories could be blocked. Several CBDC research programs have studied these capabilities as features. Opponents of a U.S. digital dollar study the same list and see tools for state control over private financial behavior.
Privacy and Surveillance
A CBDC ledger, by its nature, creates a record of transactions. How much of that record the government can see is a design choice, not a technological inevitability, and it has driven much of the opposition in the United States and elsewhere.
Central banks aware of the concern have explored technical middle ground. The European Central Bank developed a proof-of-concept using “anonymity vouchers,” where small transactions below a set threshold complete without the anti-money-laundering authority seeing any transaction data. Users receive a limited supply of vouchers that allow private transfers; once the vouchers are exhausted, further transactions route through standard compliance checks. The design also uses pseudonymous identities and a technique called “chain snipping” that periodically resets the transaction history visible to intermediaries.6European Central Bank. Exploring Anonymity in Central Bank Digital Currencies
Whether privacy protections of that kind would survive political pressure to expand surveillance during a crisis is unresolved. The structural tension is real: the same ledger that enables instant settlement also enables total visibility. Supporters of the U.S. prohibition cite China’s digital yuan as evidence that these capabilities, once built, tend to get used.
Impact on Commercial Banks
If people can hold money directly at the central bank, they have less reason to leave it in a commercial bank. The Bank for International Settlements identifies two forms of this disintermediation risk. “Slow disintermediation” happens in normal times, as depositors gradually shift funds from bank accounts into CBDC wallets and shrink the pool of cheap deposits banks use to fund loans. “Fast disintermediation” is the crisis scenario: a CBDC gives depositors a way to flee to safety instantly, holding sovereign money digitally without needing to withdraw physical cash. BIS modeling found that the probability of a bank run roughly doubles when a CBDC is available, occurring on average every 40 years instead of every 75.7Bank for International Settlements. CBDC and Banks: Disintermediating Fast and Slow
Nearly every retail CBDC design includes a cap on how much any individual can hold, specifically to prevent that migration. The European Central Bank’s proposed digital euro would cap individual holdings at roughly €3,000 to €4,000. The Bank of England has considered £10,000 to £20,000 for a potential digital pound. The Bahamas Sand Dollar starts far lower, with a basic wallet tier capped at $500 and a $1,500 monthly transaction limit.
Why There Is No U.S. CBDC
No CBDC exists in the United States, and current law and policy actively block one from being created. Federal law defines legal tender as “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks),” with no provision for a digital equivalent issued to the public.8Office of the Law Revision Counsel. 31 U.S. Code 5103 – Legal Tender The Federal Reserve’s authority to issue Federal Reserve notes comes from 12 U.S.C. § 411, which authorizes paper notes as obligations of the United States but does not extend to digital tokens distributed to individuals.9Office of the Law Revision Counsel. 12 USC 411 – Issuance to Reserve Banks; Nature of Obligation; Redemption
The Federal Reserve has stated publicly that it would not implement a U.S. CBDC without explicit approval from Congress.10Federal Reserve Board. Considerations for a Central Bank Digital Currency That approval has not come, and the political trajectory has moved sharply against it.
Executive Order 14178
In January 2025, an executive order titled “Strengthening American Leadership in Digital Financial Technology” declared it U.S. policy to prohibit “the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the United States.” The order directed all federal agencies to immediately terminate any ongoing CBDC plans and barred further development, domestically or abroad. It framed CBDCs as threats to financial stability, individual privacy, and national sovereignty.11The White House. Strengthening American Leadership in Digital Financial Technology The order does not carry the permanence of a statute, so a future administration could reverse it.
The Anti-CBDC Surveillance State Act
Congress has gone further. The Anti-CBDC Surveillance State Act (H.R. 1919) amends the Federal Reserve Act to prohibit Federal Reserve banks from offering products or services directly to individuals and from using a CBDC for monetary policy. The bill passed the House in July 2025 and has advanced through the Senate.12Congress.gov. H.R. 1919 – Anti-CBDC Surveillance State Act If enacted, the statutory barrier would require a future Congress to affirmatively repeal it before any digital dollar could move forward.
Where CBDCs Actually Exist Today
Three countries have fully launched a retail CBDC: the Bahamas, Jamaica, and Nigeria. Another 49 pilot programs are active worldwide, with 72 countries in advanced development or testing.
The Bahamas: Sand Dollar
The Bahamas launched the Sand Dollar in October 2020, the first live retail CBDC in the world. The project was motivated by geography. Across an archipelago of 700 islands, many communities lack physical bank branches, and a mobile-wallet currency solved an inclusion problem that expanding brick-and-mortar banking could not.13Central Bank of The Bahamas. The Sand Dollar Is On Schedule for Gradual National Release to The Bahamas in Mid-October 2020 Adoption has been real but modest. More than 100,000 wallets have been registered, covering about 25 percent of the population, though total value in circulation remains under one percent of all Bahamian currency.
Nigeria: eNaira
Nigeria launched the eNaira in October 2021, aiming to expand financial access in a country where a large share of the population lacks a bank account. Adoption has been slow. The IMF found that after its first year, the eNaira had “not yet moved beyond the initial wave of limited adoption.” Low merchant acceptance and limited public awareness have kept transaction volumes well below initial projections.
China: e-CNY
China’s digital yuan is the largest CBDC experiment by a wide margin. By the end of November 2025, the e-CNY had processed more than 3.4 billion transactions worth roughly 16.7 trillion renminbi (about $2.3 trillion), an increase of over 800 percent from 2023. The currency is used for dining, tourism, healthcare, public transit, and cross-border trials in Hong Kong, Macau, Thailand, and several other countries.14The State Council of the People’s Republic of China. China to Enhance Digital Yuan Management With Deposit Features Starting 2026
A structural change took effect on January 1, 2026. The People’s Bank of China began classifying digital yuan held in commercial bank wallets as bank deposit liabilities rather than cash equivalents. Commercial banks must now pay interest on e-CNY wallet balances, integrate them into standard asset-liability management, and protect them with deposit insurance. Wallet balances now count toward reserve requirements. The move transforms the e-CNY from a digital cash instrument into something closer to a deposit product.
The Digital Euro
The European Central Bank completed the preparation phase for a digital euro in October 2025 and is waiting on EU legislators to adopt the regulatory framework. If lawmakers pass the enabling regulation during 2026, the ECB projects a digital euro could be issued around 2029.15European Central Bank. Progress on the Digital Euro