Central banks around the world are actively exploring and testing digital currencies known as Central Bank Digital Currencies (CBDCs), but their goal is not to replace Bitcoin specifically. Instead, CBDCs aim to provide a state-backed digital form of fiat currency that complements or modernizes existing monetary systems. These efforts are distinct from cryptocurrencies like Bitcoin, which are decentralized and operate independently of central banks.
Central banks are moving forward with CBDC projects to maintain control over monetary policy and payment systems in an increasingly digital economy. For example, the European Central Bank (ECB) is progressing with the digital euro, having completed a draft rulebook and market consultation by late 2025. This process involves gathering feedback from a wide range of stakeholders including consumers, merchants, and financial institutions to ensure the digital euro meets practical needs and regulatory standards. The ECB plans to continue refining the technical and operational aspects of the digital euro, aiming for a flexible framework that can adapt to future developments[1].
Similarly, the Bank of England is in the design phase of its digital pound project, conducting experiments and stakeholder engagement to understand how a digital currency could function in the real world. The earliest issuance of a digital pound is expected in the latter half of this decade, pending further assessments and parliamentary approval[4].
Central banks are motivated by several factors in developing CBDCs. One is the declining use of cash; for instance, in Europe, cash transactions have dropped from 50% in 2010 to about 20% in 2025, reducing central banks’ influence over physical currency circulation[3]. CBDCs also offer the potential for more precise and real-time monetary policy implementation through programmable money supply, which could improve efficiency and reduce costs in payments, including cross-border transactions[3][5]. For example, India is expanding its CBDC pilot for the e-rupee, seeing it as a solution for cheaper and more secure cross-border payments, although the benefits depend on wider adoption by other countries[2].
However, CBDCs differ fundamentally from Bitcoin and other cryptocurrencies. Bitcoin is decentralized, operates on a blockchain without central authority, and is often viewed as a store of value or speculative asset rather than a medium of exchange. CBDCs, by contrast, are centralized digital currencies issued and regulated by central banks, designed to maintain the integrity and stability of national currencies. They also raise concerns about privacy and surveillance since CBDCs can remove the anonymity of cash transactions, potentially allowing governments to monitor or control how money is used[3].
Another challenge for central banks is the rapid growth of stablecoins—private sector digital currencies pegged to fiat currencies—which have surged to hundreds of billions of dollars in market value. Central banks worry that stablecoins could undermine their control over monetary systems if they become dominant in payments. Yet, central banks are moving cautiously and deliberately, focusing on regulatory frameworks and technical robustness to ensure CBDCs can coexist with or provide a safer alternative to stablecoins[2][6][8].
Innovative projects like Project Agorá, involving multiple central banks and financial institutions, are testing tokenized money and unified ledgers to improve cross-border payments. These initiatives aim to combine the benefits of digital currencies with the trust and reliability of traditional banking systems, exploring how programmable money can be safely integrated into global finance[5].
In summary, central banks are not testing digital currencies to replace Bitcoin but are developing CBDCs to modernize national currencies, enhance payment systems, and retain monetary sovereignty in a digital age. These efforts involve extensive research, consultation, and experimentation to balance innovation with regulatory oversight, privacy concerns, and financial stability. The timeline for widespread CBDC adoption varies by country, with some projects expected to launch in the late 2020s, reflecting the complexity and cautious approach central banks are taking.