DFC

Dirk Niepelt presented a paper at a Swiss National Bank (SNB) seminar that examines how shifts such as the introduction of retail central bank digital currencies (CBDCs) and private currencies can impact the economy. The paper identifies specific conditions—such as policy design, transfer mechanisms, and bank lending support—under which these changes can occur without altering real economic outcomes, a concept termed as “neutrality.” It argues that while a neutral transition to CBDCs is feasible through careful management, introducing private currencies poses greater challenges, often resulting in significant effects on resource allocation and market equilibrium. Ultimately, the economic impact of such financial innovation is not predetermined but depends on policy choices, institutional constraints, and underlying financial frictions. [Source: SNB]

The Journal of Financial Economics (JFE) published an article that analyzes how competition from private digital money (like cryptocurrencies and stablecoins) and foreign currencies is driving national governments to digitize their own currencies and modernize payment systems. The authors find that less-dominant currencies tend to digitize faster to gain a competitive edge, while dominant ones like the U.S. dollar delay action until truly threatened. If governments hesitate too long, private digital money can take over, reducing the role of traditional fiat currencies in global payments. The study highlights that regulation, public–private partnerships, and strategic timing all impact this competition, and achieving efficient outcomes will require cross-border cooperation. Ultimately, the enduring significance of fiat currencies in digital payments depends on strategic, timely, and coordinated digitization by governments.

A team of central bankers posted a paper on SSRN that reviews reviews the practical rollout and early experiences of retail CBDCs in The Bahamas (SandDollar), China (e‑CNY), and Jamaica (JAM‑DEX®) as of August 2025, noting that early public uptake was modest but that more recent data point to a gradual increase in use. It finds no evidence of significant movement of bank deposits into these CBDCs, in part because they are used primarily as payment instruments rather than savings vehicles, and most transactions incur no fees for consumers or merchants, implying potential cost savings versus traditional alternatives. Each jurisdiction’s design reflects distinct policy goals—such as financial inclusion and payments modernization—implemented via two‑tier, account‑based structures with streamlined onboarding for the unbanked and a range of incentives to spur user and merchant adoption. The study underscores that clear public communication, market‑based incentives to secure private sector participation, and international peer learning are critical for success, and that while CBDCs still represent only a small share of total payments, they fill specific gaps and offer useful lessons for global policymakers. [Source: SSRN]

OMFIF interviewed G+D's Lars Hupel, who emphasizes that for central bank digital currencies (CBDCs) to be widely adopted, seamless point-of-sale (POS) integration is essential. Rather than building new hardware, he suggests leveraging current POS devices and card payment infrastructures, updating them with software for CBDC compatibility. A key to merchant acceptance is providing commercial incentives like lower transaction or scheme fees, rather than relying on regulations such as mandatory acceptance. For users, CBDC payments should be as intuitive as current digital payments, prioritizing convenience and instant, possibly offline, settlement. Ultimately, Dr. Hupel argues that easy technical and commercial integration at POS is the hidden, but critical, catalyst for CBDC adoption, promising greater resilience and efficiency in retail payments.

The Bank for International Settlements (BIS) published its annual central bank digital currency (CBDC) survey. It found that 91% of the 93 central banks surveyed were actively exploring CBDCs in 2024, with wholesale CBDC development generally more advanced than retail versions. The primary motivation remains preserving the role of central bank money amid declining cash usage and rising asset tokenization, with over one-third of central banks accelerating their CBDC work in response to stablecoin developments. Significant differences exist between advanced economies and emerging market economies in terms of legal frameworks, design features, and use cases—with emerging economies more likely to have clear legal authority and consider features like distributed ledger technology. Simultaneously, 67% of jurisdictions now have enacted or are developing regulations for stablecoins and cryptoassets, while asset tokenization has gained traction in most advanced economies and one-third of emerging markets, particularly in bond markets, suggesting a coordinated evolution of both public and private digital money initiatives.​​​​​​​​​​​​​​​​ [Read more at the BIS]

A paper published in the International Journal of Bank Marketing explores how personal financial planning impacts individuals’ willingness to adopt central bank digital currencies (CBDCs), using survey data from Sweden and the UK. The research finds that individuals who engage in activities such as budgeting, tracking expenses or setting long-term goals are more likely to express interest in CBDC adoption. These behaviors, reflecting financial literacy and forward-looking decision-making, align with openness to innovative financial technologies, were strengthened by perceptions of security, safety, and trust in the new technology. Individuals who believe that CBDCs are secure and that their personal data will be protected are significantly more likely to adopt the technology. Socioeconomic factors like education and age, as well as personal attitudes toward technology and risk, also influence adoption.

A forthcoming Bar Ilan University Faculty of Law Research Paper reports on the results of a multi-stage nationally-representatvie survey conducted in collaboration with the Bank of Israel on Israeli attitudes towards a possible digital shekel. The survey revealed that willingness to adopt was strongly correlated with trust in the central bank; respondents who expressed higher trust in the Bank of Israel were much more likely to intend to use the digital shekel. Interestingly, concerns about privacy were lower among Israelis compared to similar surveys in other countries, which may explain their relatively high acceptance. When asked about the most important features, respondents prioritized ease of use across payment scenarios, fraud protection, the ability to use the currency offline, absence of hidden fees, the option to earn interest, and above all, assurance that the central bank would not have access to personal transaction data. Overall, the survey highlights that while technical features matter, trust in the central bank is the most decisive factor influencing public willingness to adopt CBDC in Israel.

The University of California (UC) Law Journal published a paper by Jiaying Jiang that explores the debate around implementing central bank digital currency (CBDC), focusing on the tension between privacy and regulatory demands. The author argues that the prevailing fear of government surveillance is not a technical inevitability but a result of outdated anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations. To address this, the paper proposes concrete solutions: modernizing AML/CFT rules to allow for limited, threshold-based anonymity in everyday CBDC transactions; updating institutional record-keeping and reporting so small or low-risk transfers can occur privately; adopting privacy-preserving technologies like token-based payment options and encryption; and introducing clear legal carve-outs that permit financial institutions to implement privacy-by-design features without breaching regulatory obligations. These reforms, the author contends, would enable a digital dollar that protects user privacy while still equipping authorities with the tools necessary for oversight and crime prevention—demonstrating that privacy and compliance can be achieved together through thoughtful legal and technical innovation.

The Reserve Bank of Zimbabwe (RBZ) is reportedly again exploring the possibility of introducing a central bank digital currency (CBDC). The central bank is starting by conducting a CBDC consumer survey to solicit opinions on the design and nature of the CBDC and its overall acceptance by the public. In November 2021, the Cabinet mandated the RBZ to explore the feasibility of a CBDC. Since then, the RBZ has undertaken study tours to countries in the advanced stages of CBDC development, and has drawn up a roadmap for potential CBDC adoption in Zimbabwe.

Several G+D researchers published an evaluation of the use of threshold elliptic curve digital signature algorithm (ECDSA) signatures to harden key management in central bank digital currency (CBDC) systems, using G+D’s Filia as a case study. It motivates TSS to eliminate single points of failure in custodial wallets run by financial service providers (FSPs), and compares two integration options, selecting a separate key management network (KMN) that holds key shares and serves signing to Payment Processors for modularity and security. After defining CBDC-driven requirements (transparent coexistence with standard wallets, efficient DKG, high signing throughput, secure key export/import and key updates, compatibility with P-256 ECDSA, and strong composable security), the authors choose the CGGMP21 protocol (via the dfns Rust library) for its UC security, P-256 support, pre-signing, and one-round online signing. Benchmarks show DKG, pre-signing, and signing costs grow with threshold size; end-to-end tests integrating KMN into Filia reveal roughly an order-of-magnitude throughput drop versus non-threshold setups, especially for cross-FSP transfers, though performance is acceptable for smaller n and t. Identified bottlenecks include interactive signing when pre-signatures are unavailable after key updates; proposed mitigations include background pre-signing and persistent channels. The conclusion is that TSS meaningfully strengthens CBDC security and is feasible for real deployments with careful engineering and parameter choices.

Banco Central do Brasil (BCB) will reportedly launch its Drex central bank digital currency (CBDC) in 2026. Project lead Fabio Araujo said the rollout will come in two phases, with the initial phase dropping tokenization and the decentralized blockchain-based design it had piloted due to immature privacy solutions that failed to meet bank-grade confidentiality and verifiability standards. This shift means several programmable use cases tested in pilots won’t be available at launch, and there’s no guarantee Drex will continue using Hyperledger Besu, the Ethereum-compatible platform previously chosen. The first release will focus on a lien reconciliation solution to enable credit operations with various types of collateral, with details on supporting tools yet to be announced. Drex has been through several iterations, the first focusing on retail CBDC, the second on wholesale CBDC-backed tokenized deposits, and then this third iteration, which could be either retail or wholesale CBDC.

The IMF published a Fintech Note that examines technology solutions for enabling central bank digital currency (CBDC) operations in environments with limited or no connectivity. The paper analyzes various technological approaches across a spectrum of connectivity scenarios, from complete offline functionality to SMS/USSD-based systems that work on basic cellular networks. Through interviews with payment platform providers, central banks, and industry experts, different form factors (smartphones, feature phones, stored-value cards, and custom devices) are evaluated against three key criteria: accessibility and usability, cybersecurity and operational risks, and privacy considerations. The research reveals that no single solution meets all requirements, necessitating tailored combinations of technologies based on local infrastructure and user needs. Key findings indicate that while fully secure offline solutions do not yet exist, effective risk mitigation strategies through transaction limits, secure elements, and staged reconciliation have been successfully tested in pilot environments. The paper concludes that successful offline CBDC deployment requires ongoing technological agility, diverse access channels, and proactive risk management over unattainable absolute security.

A trio of Bank of Canada economists posted a paper on SSRN that analyzes how the introduction of a central bank digital currency (CBDC) could impact traditional bank deposits by developing a micro-founded model based on Canadian household data. The study finds that a non-interest-bearing CBDC without complementary financial products or an extensive physical service network would only minimally draw funds away from bank deposits (about 1% reduction), but expanding the CBDC’s physical presence (e.g., through Canada Post offices) could crowd out up to 7% of deposits, and only a very extensive network would reach around 12%. Placing holding limits on CBDC accounts (e.g., C$ 25,000 CAD) can significantly reduce this crowding-out effect while affecting the welfare of only a small fraction of households. The paper highlights that bank deposit choices are strongly influenced by complementary services (like mortgages and credit cards) and convenient access to branches.

[March 6, 2025] Article 53 of Serbia's Law on the National Bank of Serbia (NBS) was amended to give the central bank the right to issue the som in digital form (digital som). However, it's not entirely clear when the amendment was made, except that it was likely in either 2018 (RS Official Gazette, No. 44/2018 published on June 9, 2018) or 2025 (No. 19/2025 published on March 6, 2025). Those are the only two amendments to the Law that make sense from a review of the current consolidated version of the Law, because the next previous amendment (No. 40/2015) was published in 2015 which seems too early in the history of central bank digital currency (CBDC) to be plausible. Even 2018 seems to be on the verge of implausibility, so I'm guessing that the amendment was published on March 15, 2025.

The National Bank of Rwanda (NBR) in collaboration with Giesecke+Devrient (G+D), will host a retail central bank digital currency (CBDC) Ideathon. This event aims to engage local payment industry stakeholders, including individuals, startups, Fintechs, and other innovators, to validate ideas and use cases that foster the adoption of a potential e-Franc-Rwandais. The NBR’s CBDC work goes back to 2023 when it launched a feasibility study in collaboration with the Alliance for Financial Inclusion (AFI) that culminated in a research paper published in 2024. Registration of interest in the Ideathon closes on August 15, 2025, after which successful applicants will get access to the G+D Filia Wallet App to test the base functionalities of a potential eFranc-Rwandais. The idea is to create innovative use cases on top of the core CBDC functionalities (only conceptually, no need to do a prototype or any programming) and submit final idea by September 15, 2025. This will be followed by an event with final presentations in front of jury on the September 30, 2025. Selected use cases could potentially be developed further in future proof-of-concept work or a pilot.

The Banco Central de Timor-Leste (BCTL) has reportedly entered a new phase of its strategic partnership with Montran to drive modernization of the country’s payments ecosystem and advance development of a central bank digital currency (CBDC). As part of this initiative, Montran’s Instant Payments Solution (IPS) will be deployed across the country to enable secure, real-time payments and provide interoperability between financial institutions, businesses, and individuals. Montran is also working with BCTL to develop a national strategy for introduction of a CBDC, known as eCentavos.

The European Central Bank (ECB) published a preliminary draft version (version 0.9) of the digital euro scheme rulebook. It reflects the ECB's continuous effort to develop a draft rulebook in close cooperation with the Rulebook Development Group (RDG), comprising senior representatives from European associations representing both the supply and demand side of the retail payments market. Version 0.9 is generally based on the 2023 proposal for a regulation on the establishment of the digital euro (2023/0212/COD) and the Regulation on the provision of digital euro services by payment services providers incorporated in Member States whose currency is not the euro (2023/0211/COD). Version 0.9, which was shared with the RDG members on 30 June 2025, is non-binding and does not necessarily reflect the final views of the ECB, the Eurosystem, the RDG, or any of its members or their constituencies.

The BIS published a paper that examines central bank and media sentiments regarding central bank digital currencies (CBDCs) across 15 major economies from 2016 to 2022, using large language models to analyze over 1,200 central bank publications and nearly 29,000 news articles. The study reveals significant divergences between central bank and media sentiments, with notable variations over time and across jurisdictions, finding that central bank sentiment tends to exert a stronger influence on media sentiment than the reverse. The research identifies substantial cross-border sentiment spillovers, where sentiment in leading economies shapes sentiment in other regions. The findings suggest that while media generally express more positive views about CBDCs and focus on technological aspects, central banks concentrate more on payment system implications and financial stability concerns, with the sentiment gap having narrowed over time since the initial period when media sentiment significantly exceeded central bank sentiment.

The Cato Institute published a briefing paper by NicK Anthony that examines the implementation and adoption of central bank digital currency (CBDC) in Jamaica (JAM-DEX) and The Bahamas (SandDollar), concluding that both initiatives have fundamentally failed to achieve their stated objectives. The analysis demonstrates that CBDCs in both countries have failed to gain traction with consumers or businesses, instead becoming little more than vehicles for government handouts—distributed through limited-time giveaways and incentive programs, with little lasting use. The paper documents how virtually every increase in CBDC circulation corresponds directly to government interventions rather than organic adoption, with Jamaica's CBDC representing merely 0.1 percent of cash circulation despite extensive promotional efforts. Similarly, The Bahamas achieved a 30% sign-up rate but struggled with actual usage. Anthony argues that these Caribbean experiments reveal a fundamental flaw in CBDC policy: people are already well-served by existing payment options including cash, cards, and digital apps, making CBDC an unnecessary redundancy that requires artificial incentives to maintain even minimal usage levels.

Noelle Acheson published an article that details mounting challenges facing the European Central Bank's digital euro initiative, highlighting significant delays and cost overruns that cast doubt on the project's viability. She notes troubling signs including prolonged reporting delays, stalled legislative progress following the resignation of key EU officials who oppose the project, and ongoing tender processes that should have been completed months ago. While the ECB allocated approximately €1.2 billion just for initial development tenders in January 2024, with over half dedicated to offline functionality that is proving more complex than anticipated, the banking industry faces an estimated €18 billion in adaptation costs for a service that could threaten their deposit base. Noelle expresses particular skepticism about the €154 million allocated for app design, questioning why a central bank is developing retail-focused applications, and suggests that despite ECB President Christine Lagarde's public pressure on lawmakers, the project appears increasingly unstable with potential for significant scaling back of ambitious features.

The Bank of England (BoE) published a note on interoperability models for UK-based payments outlined its emerging thinking on how a potential digital pound could seamlessly exchange with other forms of money within domestic UK transactions. The core objective of a digital pound would be to preserve the "singleness of money" - ensuring all sterling forms remain equally valued and interchangeable - while supporting innovation, choice, and efficiency in the payments ecosystem. The note outlines and evaluates three interoperability models—centralized, intermediary-based, and direct provision by payment interface providers—and evaluates their trade-offs for users, participants, and the financial system. It concluded that the centralized model would best provide the capability to ensure uniform access and reduce costs.

The Bank of England (BoE) published a design note outlining its emerging product strategy for a potential digital pound, which would operate under a public-private model where the Bank manages the core ledger while regulated private firms provide user-facing services to individuals and businesses. The strategy proposes a three-stage rollout (Initial, Near, and Later) focusing first on enabling convenient peer-to-peer payments and online commerce acceptance, with more complex features like point-of-sale terminal integration and conditional payment functionality introduced in subsequent phases. The digital pound aims to preserve the "singleness of money" and support payments innovation while complementing physical cash, though business acceptance would not be mandated and adoption is expected to be gradual.