Global CBDC Push Grows, but IMF Flags Major Risks for Banks, Competition and Adoption

Global experimentation with central bank digital currencies is accelerating worldwide, but the IMF warns that success depends on careful design, strong legal foundations, and realistic assessments of financial stability and adoption risks. The paper shows CBDCs can enhance competition and resilience, yet poor implementation could destabilize banks, strain institutions, or fail to gain public trust.

Around the world, central bank digital currencies are accelerating from theory to policy reality, guided heavily by research at institutions such as the International Monetary Fund (IMF), the Bank for International Settlements (BIS), and the ASEAN+3 Macroeconomic Research Office (AMRO). The IMF’s latest paper, drawn from the forthcoming 2025 updates to its CBDC Virtual Handbook, portrays a complex and fast-evolving monetary landscape. It shows governments pushing forward with digital legal tender while wrestling with difficult economic, legal, and technical tradeoffs that make CBDC one of the most consequential financial innovations of the decade.

Momentum and Setbacks Across the CBDC Map

The report captures a world moving unevenly toward the digitalization of money. China has expanded its e-CNY pilot into Hong Kong, achieving the first-ever linkage between a fast-payment system and a CBDC. India is testing offline and programmable layers while experimenting with wholesale settlement of government securities. Kazakhstan, Brazil, and Russia are preparing national launches between 2025 and 2026, while the EU and UK continue refining the digital euro and digital pound frameworks. Yet several advanced economies, Australia, Canada, and Thailand, have hit pause, concluding that their needs are met by existing infrastructure. In the U.S., CBDC exploration is politically stalled following House approval of a bill blocking Federal Reserve development. Meanwhile, countries that have already launched CBDCs confront an adoption problem: Jamaica’s JAM-DEX, The Bahamas’ Sand Dollar, and Nigeria’s eNaira all record usage below 2 percent, despite hefty incentive programmes. Regulators in these early-adopter countries are now shifting from promotional tactics toward mandating bank participation.

Financial Stability at the Center of Policy Anxiety

A major portion of the paper is devoted to the economic channels through which retail CBDCs may affect financial stability. By offering households a new, risk-free digital asset, CBDCs could prompt deposit outflows from banks, raising funding costs and tightening lending. Banks may also lose fee income from payment services, and the safety of CBDCs could accelerate bank runs in crises. But the IMF stresses these effects depend heavily on country-specific conditions. In many advanced economies, modelling suggests moderate adoption would not pose systemic threats, particularly when banks have diversified funding structures. At the same time, CBDCs could strengthen resilience by increasing redundancy in payment systems and improving informational flows if designed with privacy-sensitive data-sharing mechanisms. Policymakers are urged to rely on balance-sheet analysis, macro-financial models, and careful design choices, such as holding caps or tiered remuneration, to avoid destabilizing the financial system.

Competition, Law, and AML: Areas of High-Stakes Complexity

The report underscores that CBDCs are not automatically pro-competitive. In markets dominated by private platforms, BigTech wallets, card networks, or large e-money providers, CBDCs could increase access, lower fees, and expand consumer choice. In fast-payment environments like India’s UPI or Brazil’s Pix, CBDCs may play a supportive rather than transformative role. But poorly calibrated CBDC design could crowd out private providers, pushing central banks into operational roles they are not built to sustain. Legal challenges loom large as well. Many countries lack explicit statutory authority for issuing CBDC or operating national digital platforms. Questions persist around legal tender status, wallet ownership, settlement finality, intermediary responsibilities, insolvency protection, and the enforceability of programmable payments. Financial-integrity issues are equally thorny: FATF standards offer little CBDC-specific guidance, forcing countries to interpret how anti-money-laundering rules apply to account-based, token-based, or hybrid designs. “Cash-like” low-KYC wallets remain a grey area in global compliance.

Fragile States and the Rise of Tokenized Reserves

In fragile and conflict-affected states, from Ukraine and Gaza to Sudan, Yemen, and Haiti, payment disruptions can cripple daily life. The IMF argues that CBDCs, if designed with offline capability, low-tech access, and redundancy, could strengthen resilience by providing backup payment rails and enabling programmable emergency transfers. Still, weak institutions and low public trust make implementation highly challenging. On the wholesale side, the report explores tokenized reserves, DLT-based versions of central bank reserves that could support atomic settlement of tokenized assets. While they promise efficiency and programmability, they also introduce cybersecurity and liquidity-fragmentation risks. Central banks are encouraged to weigh tokenized reserves against simpler alternatives like RTGS-DLT “trigger” mechanisms or fully backed omnibus accounts.