CBDCs and the digital euro worldwide.

The money in an ordinary payment account is a claim on a commercial bank, not directly on the central bank. If that bank fails, the money generally falls under a deposit guarantee scheme up to a certain amount, but it legally remains a debt owed by the bank to the account holder. A CBDC, by contrast, would be a direct claim on the central bank itself, comparable to cash but digital.

That distinction matters especially during financial stress: money held at a central bank cannot in theory 'fail' the way a commercial bank can. At the same time, this creates risks for the banking system as a whole, since savers worried about their bank could shift en masse into a CBDC, putting pressure on bank funding.

To limit that risk, most central banks, including the ECB, are considering a cap on the amount an individual could hold in CBDC, so it remains mainly a means of payment rather than functioning as a savings vehicle.

The ECB has been in a preparation phase for the digital euro for several years, working out technical choices, privacy safeguards and the role of banks and payment providers. A final decision on actually issuing the digital euro also depends on approval by the European Parliament and the Council, giving the process a political dimension alongside the technical work.

A key design principle is that the digital euro would exist alongside cash, not replace it. The ECB stresses that cash will remain available for those who want it, and that the digital euro is mainly intended to make Europe less dependent on non-European payment infrastructure.

Outside the EU, developments vary widely. China has one of the most advanced CBDC programmes with the digital yuan, running pilots across numerous cities and use in a broad range of everyday payments, although nationwide rollout remains gradual. Other countries, particularly in parts of Africa and the Caribbean, have already actually launched a CBDC, often aiming to boost financial inclusion in areas with limited banking infrastructure.

The United States and the United Kingdom are more in a research phase, with significant public debate about privacy and the government's role in payments, which slows progress there compared with some other regions.

A CBDC is fundamentally different from bitcoin or other cryptocurrencies, because a CBDC is issued and managed centrally by a central bank, while most cryptocurrencies are designed to function without a central issuing party. A CBDC shares with crypto mainly its digital, ledger-based form, but not the underlying philosophy of decentralisation.

Compared with stablecoins, the difference is that a stablecoin is issued by a private company holding reserves to support its value, while a CBDC is a direct government claim without a private issuer in between. Some policymakers also see a CBDC as a way to limit the growth of privately issued stablecoins in payments.