The Future Showdown of Digital Currencies: Can Central Bank Digital Currencies Disrupt the Crypto Asset Ecosystem

Over 130 Countries Worldwide Have Entered the Market: The CBDC Wave Is Inevitable

From only 35 countries exploring in 2020 to over 130 countries now deploying strategies, the development speed of Central Bank Digital Currencies (CBDCs) is remarkable. According to data from the Atlantic Council, 19 G20 countries are in advanced stages of CBDC development. This is not a trial; it’s a transformation of the financial system.

Countries like China, the Bahamas, and Nigeria are at the forefront. They are no longer watching from the sidelines but are actively pushing digital currencies into practical applications. What financial logic is hidden behind this synchronized global trend?

What Exactly Is a Central Bank Digital Currency? Exploring the Core of CBDC

Simply put, CBDC is the digital form of a country’s legal tender—issued by the central bank, legally recognized, and with mandatory acceptance. But it’s far more than just “digitized money.”

CBDC operates using digital or tokenized units of national currency. The key question: Does CBDC have to be based on blockchain technology? The answer is: Not necessarily. Some countries adopt blockchain technology, while others use distributed ledger technology or other digital accounting methods—they are similar in principle but differ in technical implementation.

The core advantages of CBDC are:

• Surge in transaction efficiency, while reducing costs associated with minting, storing, and circulating cash
• Breaking geographical and banking service limitations through digital infrastructure
• Central banks gaining more direct policy tools for precise liquidity regulation

Cryptocurrency vs. Central Bank Digital Currency: An Ideological Confrontation

At first glance, both are digital assets, but fundamentally they are two parallel lines.

The fundamental difference in power structure

CBDC is controlled by the central bank—centralized, controllable, and regulatable. Cryptocurrencies are built on decentralized networks; Bitcoin and Ethereum do not require a central authority. In theory, crypto assets represent user autonomy; CBDC represents state control.

This opposition is unlikely to reconcile. The value of CBDC lies precisely in “manageability,” while the appeal of cryptocurrencies comes from “lack of management.”

Price stability: a one-sided race

Bitcoin’s current trading price is $89,020, down 10.51% over the past year; Ethereum’s current price is $2,980, with a 14.70% decline in the same period. Such volatility is inherent to crypto assets—market supply and demand, speculative sentiment, regulatory expectations… all uncertainties impact prices.

In contrast, CBDC is tied to national fiat currency, inherently maintaining stability. This makes CBDC more suitable for daily payments but also means it lacks investment appreciation potential.

The tug-of-war between privacy and regulation

Crypto assets claim to be anonymous, but blockchain analysis tools have proven this to be a falsehood—transaction addresses can be traced, and user identities can be reverse-engineered.

The privacy level of CBDC varies by country. Some designs emphasize transaction privacy, while others incorporate built-in audit features to prevent illegal activities. Control and privacy cannot be achieved simultaneously—this is an unavoidable dilemma for CBDC designers.

The Global Map of the Two Major Camps

Pioneers in the Asia-Pacific region

China leads the charge. The Digital Renminbi (e-CNY) was fully rolled out during the 2022 Beijing Winter Olympics, becoming the first major economy to deploy a nationwide CBDC. China’s ambitions go beyond this—digital renminbi has begun exploring cross-border use, aiming to reshape international payment systems.

India takes a steady approach. The Reserve Bank of India (RBI) launched retail pilots in October 2022. By June 2023, 1.3 million users had downloaded the digital rupee wallet, and 300,000 merchants supported digital payments. According to plans, India’s CBDC will be fully launched by the end of 2023.

Cautious exploration in Europe and America

The Federal Reserve has launched FedNow, focusing on interbank settlement rather than retail mass adoption. Europe is stuck in research and testing phases, with concerns over privacy and financial stability slowing progress.

Australia’s Commonwealth Bank and ANZ Banking Group are participating in the eAUD pilot, exploring practical applications of CBDC in commercial scenarios.

Breakthrough in Latin America

Brazil’s DREX project uses distributed ledger technology for large-value clearing, with full deployment planned by the end of 2024.

Pioneers in the Caribbean

The Bahamas’ Sand Dollar became the world’s first official national CBDC in October 2020. After hurricanes like Dorian, Sand Dollar proved its value in emergency scenarios—when traditional financial systems collapse, digital payments can still operate.

What Does CBDC Mean for the Banking System?

Central banks can directly distribute money to the public via CBDC, fundamentally changing the two-tier structure of central banks and commercial banks. Depositors might bypass commercial banks and hold digital assets directly from the central bank.

This implies:

• The deposit intermediary role of commercial banks is weakened
• Central banks gain unprecedented policy execution capabilities—precise control of M0, interest rate adjustments, and inflation responses
• Transaction processing costs in the banking system are significantly reduced, but profit margins are also compressed

CBDC vs. Stablecoins: Different Approaches

Stablecoins (like PayPal’s PYUSD) also claim to be “stable,” but their issuers are private companies, not central banks. Stablecoins hedge volatility through asset reserves but lack the unlimited payment capacity of a central bank.

In bear markets, stablecoins allow investors to park funds safely, while CBDC provides infrastructure for the entire society’s payment network—each serves a completely different mission.

An Unanswered Question: Can CBDC Kill Cash?

The answer is almost certainly no.

At least for the next decade, factors like digital divide, insufficient network coverage, and elderly reliance on cash will ensure cash’s survival. Moreover, those who control cash also hold the final say—abandoning cash means relinquishing the last safeguard of the financial system.

Will CBDC Kill Cryptocurrencies?

No. The reason is simple—CBDC aims for control and convenience, while the appeal of cryptocurrencies is precisely anti-control. These two systems have fundamental ideological differences and cannot replace each other.

The coexistence of CBDC and cryptocurrencies instead signifies a diversified financial system—some want stability, others value freedom; some trust central banks, others reject intermediaries. The future of finance will not be a single form but an ecosystem.

The Truth About the New Era of Digital Currency

The future of finance will inevitably be digital, but it will not be singular.

CBDC provides national-level infrastructure; cryptocurrencies offer individual autonomy; stablecoins provide flexible commercial solutions; traditional cash still retains its final tactile presence.

Each of these four forms has its boundaries, users, and vitality. They are not mutually exclusive but complementary.

Every financial revolution in history has faced similar debates—when paper money appeared, metal currency did not disappear; when checks emerged, cash continued to circulate. The arrival of CBDC is just another step in this ongoing process.

The future financial world will be more complex and more inclusive.