If you have ever felt confused about digital money or unsure about what CBDCs really mean, this is the place to start.
Let’s start with philosophy. Money is changing. We are moving from the sound of coins in our pockets to simple taps on a phone screen. And this is not a new phenomenon. Money has always been changing and evolving since humans started using it.
And now, the talk of the town is digital currencies, which are becoming more popular every day. You may have heard of Bitcoin or Ethereum, but now there is something new called CBDC.
CBDC (central bank digital currencies) refer to digital money created and controlled by a country’s central bank. Many governments worldwide, including China, Nigeria, Israel, and India, are exploring or testing their own CBDCs.
But one big question remains – Can you actually buy CBDC coins the same way you buy cryptocurrency? Is it even tradable as of writing?
In this article, we’ll explain everything you need to know about central bank digital currencies in simple terms.
What are Central Bank Digital Currencies (CBDCs)?
A Central Bank Digital Currency (CBDC) refers to a digital version of a country’s official money. It is different from Bitcoin and other cryptocurrencies, which are created by private individuals or companies; instead, a CBDC is issued and controlled by a central bank.
So, the idea of CBDC, ironically, kind of contradicts the origins of Bitcoins and other cryptocurrencies, which were created as a new form of money that aims to eliminate central banks and rise up as an alternative to the political system as we know it. But, central banks won’t go away so fast, and as the rush for Bitcoin and digital assets grows, central banks have realized that this is their way to stay in the game.
Essentially, CBDC works just like the cash you use every day, but in digital form. The goal is to make payments faster, safer, and more accessible in a growing digital world.
There are two main types of CBDCs: retail and wholesale. Retail CBDCs are for public everyday use. For instance, you can use them to pay for groceries, send money to friends, or pay bills, just like with mobile banking or digital wallets.
On the other hand, wholesale CBDCs are meant for banks and financial institutions. They help settle large transactions quickly and securely between big players in the financial system. Both types aim to improve how money moves, but they serve different users and purposes.
Can You Buy CBDC Coins Like Crypto?
Yes, you can get CBDC coins; however, not in the same way you buy cryptocurrencies like Bitcoin or Ethereum.
This is because CBDCs are not available on public crypto exchanges. You can’t trade them or invest in them, hoping the value will rise. Instead, CBDCs are digital versions of a country’s official currency, and they are only available through authorized channels like central banks or selected financial institutions.
In short, you don’t “buy” CBDCs in the traditional sense. Rather, you receive or use them through digital wallets approved by the government.
A Few Examples of CBDC Access In Different Countries
Here are several examples of central bank digital currencies in different countries:
India – Digital Rupee
India’s central bank, the Reserve Bank of India (RBI), launched its digital rupee trial in 2022. The pilot began with a handful of major banks and then expanded to include well-known payment apps such as Google Pay, PhonePe, and Paytm. As part of the official test run, users can use these apps to receive the digital rupee.
Nigeria – eNaira
Nigeria was the first African country to launch a CBDC., as part of Nigeria’s efforts to improve its economy. The eNaira is available through a mobile app called the “eNaira Speed Wallet,” issued by the Central Bank of Nigeria. People can get eNaira by linking their bank accounts or through selected agents.
Bahamas – Sand Dollar
The Bahamas introduced the Sand Dollar in 2020. Citizens can use it through mobile apps provided by local financial institutions. It works like regular money but in digital form.
Israel’s Digital Shekel
In 2023, Israel’s central bank invited multiple fintech and blockchain companies to participate in testing its digital shekel prototype. While no official coin has launched, several companies involved reportedly used XRP and Solana-based technologies in their proposed solutions.
This doesn’t mean Israel’s CBDC will run on Solana or XRP itself, but rather that the technology behind these platforms is being tested for potential use. These trials focus on speed, scalability, and secure transfers, things blockchain networks do well.
Other countries that launched CBDC include China, Sweden, Jamaica, Brazil, Japan, Russia, and Turkey. Overall, according to the Atlantic Council, there are 134 countries exploring the issues of CBDC.
Click here to check other countries using this digital currency.
The Risks of Central Bank Digital Currencies (CBDC)
While Central Bank Digital Currencies (CBDCs) offer many benefits, they also come with serious concerns that are raising eyebrows around the world.
1. Privacy is one of the biggest concerns
The truth is that every CBDC transaction can be tracked by the government. This means your digital wallet activity may no longer be your own. In places where trust in the government is low, people worry that CBDCs could become a tool for surveillance.
2. Censorship is another risk
Since CBDCs are fully controlled by central banks, they could be programmed to block certain types of transactions. For example, if a government decides to limit spending on specific items or freeze someone’s digital funds, it could do so instantly. This level of control has raised fears about financial freedom and how it might be affected in the future.
3. CBDCs are also centralized by design
This goes against the core idea of cryptocurrencies, which are decentralized and community-driven. With CBDCs, one authority, the central bank, holds all the power, which could lead to misuse or overreach.
4. Cybersecurity is another concern
A digital currency system managed by the government would be a major target for hackers. If the system were ever compromised, millions of people could be affected. This can be a major cyber warfare threat, which may lead to concerns for civilians as well as banks and governments.
The design of central bank digital currencies is a “global effort of collaboration rather than competition,” Agustin Cartens
How Crypto Projects Are Involved in CBDCs
Central Bank Digital Currencies (CBDCs) are under government control, but they often need blockchain tech to work well. This is where well-known crypto projects like Ripple, Stellar, and Solana play a role. People don’t use these projects to purchase CBDCs. Instead, they help central banks create the digital setup needed to roll out these currencies.
Here are some crypto applications that are expected to be widely used in CBDC projects.
Ripple (XRP)
Ripple has emerged as a leading blockchain partner in the CBDC space. Its network, powered by XRP Ledger, is designed for fast and secure cross-border payments, which makes it appealing for central banks exploring digital currencies.
Ripple has been involved in pilot programs with several countries:
- Ripple partnered with the Royal Monetary Authority of Bhutan to pilot a digital ngultrum.
- The country teamed up with Ripple to develop a USD-backed digital currency for cross-border use.
- Ripple joined as a supporting partner to share expertise on digital currency development in Europe.
Stellar
Stellar is another blockchain network focused on fast and low-cost transactions. It has been considered by financial institutions and central banks for settlement purposes in CBDC testing.
The Stellar Development Foundation has openly discussed its commitment to helping build public-sector blockchain solutions. Its network could be used to issue digital fiat currencies while ensuring secure, low-fee transfers, especially for cross-border or remittance purposes.
Again, Stellar’s native token (XLM) is not a CBDC and is not required to use CBDC systems that run on its infrastructure.
Ethereum
Ethereum stands out as the most production-ready blockchain for meeting CBDC requirements, particularly in terms of scalability, privacy, and system trust. A blockchain-based CBDC allows central banks to maintain control over the currency while safeguarding user privacy and ensuring the independent use of the digital currency by end users.
Obviously, the above are just some examples of how crypto applications might be integrated into CBDCs. The list is wider and includes various projects that can be valuable in developing and operating central bank digital currencies.
Wrap Up
In sum, CBDCs are not investment assets. You can’t buy them like Bitcoin or Ethereum, and they aren’t listed on crypto exchanges. Instead, they are digital versions of national currencies created and controlled by central banks.
If your country has launched a CBDC, like Nigeria’s eNaira or India’s Digital Rupee, you may be able to access it through official apps or approved banks. But this isn’t trading or investing. It’s simply using digital money for payments, transfers, and everyday transactions.
Remember, CBDCs are digital fiat, not digital assets. They are meant for spending, not for growing in value or being added to your portfolio.
