Central banks around the world have been closely monitoring the digital currency market’s trajectory and its impact on our current financial systems since Bitcoin launched in 2009. As a response, they developed the concept of Central Bank Digital Currencies (CBDCs) to stay aligned with innovations in the financial ecosystem.

GlobalData Global Product Holding Analytics 2024

Nonetheless, a number of developed countries’ central banks are now decelerating their retail CBDC (rCBDC) projects, with national average cryptocurrency uptake rates still under 20% across Western countries, as per GlobalData’s Global Product Holding Analytics 2024.

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The US state of North Carolina, along with the central banks of Canada and Australia, halted their local rCBDC projects in September 2024. They concluded that the costs and risks associated with the rollout will outweigh any potential benefits. Privacy concerns, along with questions about individual sovereignty, led North Carolina’s Senate to ban CBDC research and development, making the US the first country with a CBDC ban. As a result, the future of the digital dollar remains uncertain. Though on a national level the House of Representatives passed a bill to prohibit rCBDCs in May 2024, the Senate has yet to act on it.

Meanwhile, the central banks of Canada and Australia found little justification for proceeding with rCBDC. They did not identify any significant benefits or solutions to current financial system inefficiencies that would make the rollout worthwhile. The primary motivations for rCBDCs—improving payment efficiency and enhancing financial inclusion—are already largely addressed in developed nations, which perform well on both metrics. Instead, these countries’ central banks are more concerned with Big Tech stablecoin initiatives, as well as the sense of competition from developing nations’ central banks that are further ahead in their projects.

RBA to prioritise wholesale CBDC project

The Reserve Bank of Australia will now prioritise its wholesale CBDC (wCBDC) project, focussing on cross-border efficiencies and interbank interoperability via blockchain. Australia’s involvement in initiatives such as Projects Dunbar and Mandala reflects a broader trend. With ongoing challenges around privacy, financial systems’ instability, and rCBDC interoperability, more central banks are expected to shift focus towards wCBDC in the near future.

The Federal Reserve will also need to re-evaluate its defensive stance on CBDCs as global initiatives such as Project mBridge (involving China, Hong Kong [China SAR], Thailand, UAE, and Saudi Arabia) gain traction, aiming for greater de-dollarisation in global trade and finance. Such co-operation between emerging economies could pressure the US to reconsider its position on wCBDCs as it seeks to maintain its role in the evolving global financial system.

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Blandina Hanna Szalay is an analyst, banking and payments, GlobalData