Are CBDCs a non-starter?

CBDCs (central bank digital currencies) have been lauded by many as the next logical step for governments looking to keep pace with the growing demand for crypto currencies in a world dominated by digital payments. According to research published by the Atlantic Council in the US, 130 countries – representing 98% of the global economy – are currently exploring the possibility of launching a CBDC. 

But recently, interest in this area of finance seems to be waning, with a survey by the CFA Institute suggesting the financial industry is divided on whether CBDCs will provide any real benefit. 

A survey of 90,000 CFA members from around the globe showed that just 42% were in favour of the development of a CBDC. 34% of respondents said they were against the idea and 24% didn’t care either way. 

The results demonstrated a widespread lack of knowledge on CBDCs, with 87% saying they had “little or moderate understanding” of them. 

Benefits vs risks

The potential benefits of CBDCs are considerable. Having a centrally-controlled digital currency could improve efficiencies for banks by streamlining payment processes; it could improve security by providing a government-backed, low-risk place for deposits (especially during times of financial crisis) and it could increase accessibility by allowing anyone digital access to central bank funds (i.e. not just banks). 

As increasing numbers of people begin to dabble in cryptocurrencies, CBDCs could also allow central banks to address the risk of traditional cash losing its value, by essentially replacing it with a digital equivalent. 

But one “benefit” of having a CBDC is viewed by some as a potential risk: the ability of central governments to monitor transactions. Though this would be a powerful tool in combating financial crime, it also raises some difficult questions about the right to privacy. In the CFA survey, the most-cited reason for opposing CBDCs was that “data privacy risks would be too high.” 


Inevitably, CBDCs have become a political issue, demonised by some as “an evil tool that corrupts money into a tool for coercion & control” (Republican senator Warren Davidson) and lauded by others as “bringing money and finance into the 21st century” (Rishi Sunak talking about the UK’s CBDC dubbed “Britcoin,” currently in development.)

But recently, the number of politicians speaking out against the idea of a CBDC – in the US in particular – seems to be growing. “Though a potential US CBDC remains merely a subject of government study, mainstream Republicans, Silicon Valley libertarians and anti-establishment leftists have all converged in their opposition to the idea, citing concerns over privacy and government control,” writes technology journalist Ben Schreckinger in Politico. “The issue has seeped into US political discourse to the extent that Florida Gov. Ron DeSantis, a Republican, reiterated his opposition to CBDCs at his presidential campaign launch event with Elon Musk on Twitter Spaces [in May 2023].” 

In a Twitter post (now X) in June, Republican senator Bill Haggerty said: “The Biden Admin wants to kill market innovation to pave the way for a CBDC, which would give the federal gov. unprecedented insight into your life. I will fight to make sure this doesn’t happen.” 

A lack of understanding? 

As highlighted by the CFA survey, the level of understanding of just how CBDCs will work and why they are necessary – even in the financial sector itself – is shockingly low. Logic tells us that the general public’s understanding (and general interest in) CBDCs is therefore probably even lower. The CFA argues this could be an opportunity for central banks and governments to raise awareness and build support. “To a striking degree, public opinion remains an empty slate,” it says, “with sizable numbers of respondents reporting a lack of understanding of CBDCs or undecided views about them…Key questions remain on how the public would accept a CBDC, how implementation and adoption might work, how a CBDC might be used relative to other payment instruments, and how market structure and financial stability might be impacted.”

How this knowledge gap is filled (and by whom) will determine whether or not CBDCs gain traction. Governments will need to be completely transparent about how they will access user information and will need to provide valid use cases, demonstrating that CBDCs are a true solution to a problem – rather than a solution in search of one, as they have been presented by many critics.