More than 130 countries and currency unions are currently exploring the potential of a Central Bank Digital Currency (CBDC). Giesecke+Devrient (G+D) outlines five key factors for ensuring its success and unlocking its full impact on the global financial ecosystem.
More than half of the world’s countries are evaluating the issuance of a Central Bank Digital Currency – collectively representing more than 95 percent of global Gross Domestic Product. The Bank for International Settlements (BIS) anticipates that by the end of this decade, 24 central banks will have launched their own digital currency. According to the World Bank Group and the International Monetary Fund, approximately 1,4-billion people could gain access to financial services through these projects, many for the very first time.
The importance of public and central bank-issued means of payment becomes particularly evident in times of uncertainty. In an increasingly digital economy and society, such systems must be available both as physical cash and in the form of a secure and digital complement.
From G+D’s perspective, in addition to ease of use, a number of essential factors determine user acceptance and, ultimately, the success of a CBDC:
- Security and Reliability – A digital currency must meet the same high standards of security and resilience as existing payment systems – while also safeguarding user privacy. CBDC offers advantages here, as it enables a separation of operational, transactional, and administrative functions. To protect against cyber threats, a comprehensive security framework is essential. This includes a combination of internal security measures, external security audits, and continuous penetration testing. High system performance is also vital, with a benchmark capacity of at least 100 transactions per second per one million users.
- Offline functionality – Like cash, a digital currency must work anywhere, anytime. It should be designed from the outset to operate independently of network connectivity, bank accounts, expensive smartphones, or even consistent access to electricity and the internet. The widespread power outage on the Iberian Peninsula serves as a recent example highlighting the critical importance of an offline function in digital cash, ensuring the ability to make payments even in exceptional circumstances. Several pilot projects have already demonstrated the feasibility of such offline capabilities, including a successful trial in Ghana.
- Interoperability – A CBDC system should integrate seamlessly into existing infrastructures, such as cash management platforms or financial IT systems. Standardized interfaces and modular software components create added value, enabling commercial banks and fintech companies to incorporate digital currency into their ecosystems, develop innovative applications, and offer CBDC payments across e-commerce and other platforms.
- Cross-border compatibility – Ideally, digital currencies should be interoperable across borders and compatible with other central bank currencies. This would simplify international payments, reduce transaction costs and complexity, and significantly lower settlement and default risks. For emerging and developing economies in particular, these benefits are especially compelling.
- Robust regulation and public engagement – Clear and actionable regulatory frameworks are essential to support the growth of CBDC and its supporting financial infrastructure. Central banks can strengthen public trust by establishing transparent standards – covering areas such as data privacy, cross-border payments, and system interoperability. Equally important is proactive communication: informing the public about regulatory measures and the practical implementation of CBDC builds confidence and drives adoption of both the currency and the financial services built around it.
“A CBDC infrastructure forms the foundation of an ecosystem in which innovative business models can thrive,” says Dr Raoul Herborg, MD: Central Bank Digital Currency at G+D. “It creates new opportunities for growth and competition, while also playing a vital role in advancing financial inclusion, equality, and fairness.”