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Author: Admin | 2025-04-28
Dissolving Euro banknoteWhen was the last time you paid for something with cold, hard cash? While physical currency is still widely used all around the world, people in some countries have been using it a lot less lately—especially during the COVID-19 pandemic, with its cash shortages and hygiene concerns. As people shift away from cash, many are increasingly turning to digital financial transactions. Globally, banks and financial institutions process far more transactions digitally than they do in physical branches. Get to know and directly engage with senior McKinsey experts on central bank digital currency (CBDC)Vinayak HV is a senior partner in McKinsey’s Singapore office and leader of McKinsey Digital in Asia–Pacific; James Manyika is a senior partner emeritus in the Bay Area office, where Marc Singer and Olivia White are both senior partners.A variety of recent digital disruptions, including the emergence of cryptocurrencies and blockchain technology, have made waves in the financial-services sector. Digital currencies are part of that story, and central banks have started to take note. Central bank digital currencies (CBDCs) are the digital form of a government-issued currency that isn’t pegged to a physical commodity. They are issued by central banks, whose role is to support financial services for a nation’s government and its commercial-banking system, set monetary policy, and issue currency. Examples of central banks include the US Federal Reserve System, the Bank of Japan, the People’s Bank of China (PBOC), and Germany’s Deutsche Bundesbank. CBDCs are similar to—but not the same as—stablecoins. Stablecoins are a specific type of private, stabilized cryptocurrency pegged to another currency, commodity, or financial instrument with the goal of maintaining a relatively stable value over time. Unlike cryptocurrencies, which are decentralized, CBDCs are state issued and operated. Learn more about McKinsey’s Financial Services Practice.What are the different types of CBDCs, and where are they currently in use?There’s no one type of CBDC; a wide variety of approaches are being piloted in various countries. One type of CBDC is an account-based model, such as DCash, which is being implemented in the Eastern Caribbean. With DCash, consumers hold deposit accounts directly with the central bank. At the opposite end of the spectrum is China’s e-CNY, a CBDC pilot that relies on private-sector banks to distribute and maintain digital-currency accounts for their customers. China showcased e-CNY during the 2022 Olympic Games in Beijing. Visitors and athletes could use the currency to make purchases within the Olympic Village.Another model is the one under consideration by the European Central Bank in which licensed financial institutions each operate a permissioned node of the blockchain network as a conduit for the distribution of a digital euro. A final model, popular with “cryptophiles” but not yet fully trialed by central banks, is where fiat currency (currency that is government issued but not backed by a commodity) would be issued as anonymous fungible tokens to protect users’ privacy.At present, 87 countries—representing more than 90 percent of global GDP—are exploring CBDCs. Here’s a closer look: Jamaica’s JAM-DEX launched in June 2022
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