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The world’s central banks have embarked on a central bank digital currency, or CBDC, revolution — but midway through 2025, the results are mixed. Virtually every major economy is exploring CBDCs, rising from 35 countries in 2020 to 134 countries representing 98% of global GDP.
Summary
- Retail CBDCs are stalling while wholesale CBDCs advance: Retail projects show minimal adoption due to redundancy with private payment apps and restrained design choices, while wholesale CBDCs see accelerating pilots with fewer political hurdles.
- With 134 countries exploring CBDCs but no shared standards, global finance risks splintering into “digital islands,” creating cross-border friction and uncertainty for banks unless interoperability frameworks emerge.
- A viable CBDC system requires programmable, compliant, cross-border layers that connect national ledgers. Collaboration among central banks, banks, and tech providers — not isolated national rollouts — is essential to build a unified global settlement network.
Retail CBDC initiatives have largely stumbled in gaining public uptake, even as wholesale CBDC experiments accelerate among banks. The contrast is stark: retail vs. wholesale CBDCs are following very different trajectories. The divergence now defines the debate — and raises the question of whether CBDCs are maturing into a coherent global system or fracturing into disconnected “digital islands.”
Retail CBDCs vs wholesale CBDCs
Retail CBDCs are digital currencies issued by central banks for use by the general public — essentially a digital form of cash. Wholesale CBDCs, on the other hand, act as high-powered digital reserves for the banking system — used for interbank settlements and large-scale transfers.
Retail CBDCs promise financial inclusion and payment convenience, but adoption has been sluggish. Nigeria’s eNaira (launched Oct 2021 as Africa’s first CBDC) has struggled to gain traction, with only ₦13.9 billion eNaira in circulation by the end of 2023 — representing only 0.38% of Nigeria’s currency. The Bahamas’ “Sand Dollar” — the world’s first retail CBDC — also saw a gradual uptick, reaching about 150,000 wallets by late 2023.
Why the tepid uptake? Ultimately, consumers already have private digital payment options. Without a clear advantage, a government digital currency can feel redundant. In addition, central banks have imposed design limits to avoid disintermediating banks or triggering digital bank runs. The result is an “innovation trap”: central banks want adoption but must temper features to prevent disruption, leading to a stalemate of limited usage.
Meanwhile, wholesale CBDCs have been gaining traction out of the spotlight. These bank-to-bank digital currencies aim to modernize settlement infrastructure, often using distributed ledger technology. Crucially, wholesale CBDC projects have faced less political resistance since they don’t involve everyday citizens’ wallets.
In summary, retail CBDCs have encountered adoption bottlenecks, while wholesale CBDCs are marching ahead in pilot programs. Policymakers are recognizing that the retail use case may need more groundwork, whereas the wholesale use case delivers more immediate efficiency gains for the banking sector. Many central banks now prioritize wholesale and cross-border CBDC initiatives over domestic retail rollouts.
Implications for banks and cross-border payment systems
The rapid but uneven rollout of CBDCs worldwide is double-edged for banks and the global financial system. One major worry is the fragmentation of cross-border payments. If every country builds its own digital currency system, we could end up with a patchwork of siloed networks that don’t talk to each other. The Atlantic Council warns that there’s a risk that digital currencies could “create further fragmentation of the financial system, deepen digital divides, and create systemic risks”.
Interoperability isn’t just a technical question, but also a policy one: Will central banks agree on common standards or mutual access arrangements? Right now, various models are being explored. Some regions consider linking systems directly; others look to multilateral platforms. SWIFT, not to be outdone, has been experimenting with routing CBDC transactions over its network. But to date, there’s no clear winner. A risk is that new “digital islands” form, where value moves easily within a CBDC system domestically but is hard to get out internationally.
In summary, the current trajectory of isolated CBDC projects leaves banks without clarity or immediate benefit. They face potential deposit disintermediation from retail CBDCs and costly fragmentation in wholesale uses. Interoperability, standards, and co-design with the private sector are not just buzzwords — they are essential to avoid a fragmented future. Without them, CBDCs could ironically make global finance more complex, not less — raising the question of what kind of architecture can prevent that outcome.
The path forward
The path forward lies in rethinking architecture and collaboration. Rather than each CBDC being an isolated project, we need interoperable models that leverage a layered approach — combining the trust of central bank money with the innovation of private-sector technology. In practice, this means building L2 networks that sit atop individual CBDCs to connect them, enabling seamless value flows across borders and platforms.
A successful future CBDC system must be programmable, interoperable, and compliant by design. Establishing an interoperable L2 module that connects national CBDC ledgers via neutral, shared networks will establish bridges so that a payment can happen in seconds with automatic currency conversion and messaging.
The next stage is to ensure we can embed smart contracts into money. This programmability means business logic can be executed with payments. Finally, compliance will need to be considered as part of the process. Policymakers will rightly insist that any future CBDC network uphold AML, KYC, and capital control rules. The next phase of the CBDC journey calls for collaboration between central banks, commercial banks, and tech innovators to build a shared global settlement fabric. No single entity can unilaterally set the standards; it will take coalitions, much like how international payment standards were developed.
Bridging the divide
The encouraging news is that such cooperation is starting: BIS Innovation Hub projects, IMF discussions, and even private sector consortia are converging on the idea of interoperability. The challenge will be moving from pilot to production — and doing so in a way that delivers tangible benefits to banks and end-users, not just central banks.
The world doesn’t need yet another siloed digital currency — it needs an interoperable, secure, and scalable digital settlement network that ties all these experiments into a coherent whole. The failures and slow starts of early CBDCs have taught us one thing: visionary technology architecture matters. We can’t achieve a true digital money revolution with one country at a time, working in isolation. We need an interconnected solution that is bold in design yet practical in deployment.
