Nominis Explains: What is a CBDC?

Central Bank Digital Currencies (CBDCs) are one of the most polarising innovations in global finance. Over 130 countries are exploring or piloting digital versions of their national currencies from China and Thailand to Canada and the United Kingdom. 

CBDCs are expected to accelerate signficantly, an ‘explosion’ event, driven by central banks’ goals to modernise payments, enhance financial inclusion, and respond to the rise of Bitcoin, Ethereum and stablecoins. 

Yet, skepticism and expert criticism are mounting. While global institutions like the International Monetary Fund and the European Central Bank advocate for CBDCs as tools of efficiency, financial inclusion and innovation, critics warn of surveillance risks, programmable restrictions, and the potential for state control over money. Even the Bank of England is re-evaluating its digital pound, highlighting that the debate over CBDCs extends well beyond financial theory into real-world policy concerns. 

Central Bank Digital Currencies are digital versions of national currencies, issued and fully controlled by central banks. Unlike decentralised cryptocurrencies such as Bitcoin and Ethereum, CBDCs are centralised, programmable and fully state-backed. 

Proponents argue that they can modernise payments, lower transaction costs, and expand financial access, especially for unbanked populations. Critics however warn that centralisation introduces risks absent in traditional cryptocurrencies, including government surveillance and the potential for programmable restrictions on spending. 

The deeper concerns are not only technical, but also philosophical. CBDCs embed power directly into money itself. Unlike cash, which works without permission, a CBDC could be designed to restrict usage by time, place or purpose, placing unprecedented control into a central power. 

The case for CBDCs: Efficiency and Inclusion

Institutions such as the IMF and ECB consistently advocate for CBDCs. Kristalina Georgieva of the IMF has called for a global CBDC platform to reduce cross-border costs and improve remittances. Christine Lagarde of the ECB has pushed for the digital euro, warning that Europe risks falling behind in payment innovation if it delays adoption.  On the topic of introducing the Digital Shekel, the Bank of Israel suggests the introduction alongside cash and money in bank accounts will increase competition in the payments market, encourage innovation, and increase resilience.  Generally, advocates argue that CBDCs, when designed properly, are not tools of surveillance but instruments to modernise financial systems, expand access to digital payments, and enhance resilience against an increasingly digital global economy.

European Parliament Building, Strasbourg

In practice, public discussion often lags behind policy. In the case of the digital shekel, the project is presented in Israel as innovative and cautious, but the risks of programmable control and financial surveillance are rarely debated openly. 

The Case Against CBDCs: Surveillance and Control 

Tech analyst Efrat Fenigson has been outspoken about CBDC risks: 

‘CBDC is the ultimate prototype of a prison without physical chains’, warning that governments could use programmable restrictions to dictate what people can buy, under the guise of encouraging inclusion. Fenigson also notes that authorities could freeze accounts or deactivate them entirely, and that CBDCs could even include expiration dates, forcing citizens to spend rather than save. By linking digital currencies to identification systems or social credit frameworks, she argues, central banks could create constant surveillance over everyday financial activity. 

At the Blockchain Expert Conference in September 2025, Fenigson further emphasized her skepticism. She stated ‘The state is not your friend. We are in a race to change the global monetary system. In the long run, Bitcoin will win. In the short term, stablecoins will help get up there, and CBDCs will teach people a lesson along the way’. This statement underscores her belief that CBDCs will become tools for control, rather than instruments of financial freedom. 

She contrasts CBDCs with Bitcoins and stablecoins, framing them as three distinct chives for the public: 

• Bitcoin, offering financial sovereignty but demanding responsibility 

• Stablecoins, a convenient bridge tied to the dollar but dependent on regulators and private entities 

• CBDCs, the most centralised and programmable form of money, where freedom is traded for efficiency. 

This spectrum, she says,  highlights the real dilemma: convenience under control, or freedom with responsibility. 

Some countries like El Salvador, Portugal’s Madeira Island, and Switzerland’s Lugano are experimenting with Bitcoin as legal tender or community money. 

Others have fully launched CBDCs, but appear to struggle. Nigeria was among the first three countries to launch a CBDC - the eNaira, in October 2021. Nigeria struggled with low adoption, which remained at just 0.5% of the population. Researchers sought the absence of technological infrastructure, privacy concerns, and mixed perceptions about reliability and security as the reason behind low adoption.  An existing lack of trust in formal financial institutions further drew citizens away from the launched CBDC in Nigeria. 

Meanwhile, The People’s Bank of China has expanded their Digital Yuan Pilot Program without trouble - over 180 million wallets have been opened. Though it was relatively widely adopted unlike Nigeria, it has failed to gain traction, while alternatives such as AliPay and WeChat Pay remain popular among citizens for everyday use. 

Some central banks who were previously exploring the introduction of CBDCs are now getting cold feet. Reports suggest that the Bank of England is considering scrapping its Digital Pound Plans. Andrew Bailey, Governor of the Bank of England, recently stated during a conference in Ukraine that he remains to be ‘convinced that we need to create new forms of money, such as CBDC, to achieve the benefits of smart contracts in payment… and fight fraud.’ Bailey expressed concern at the potential for widespread and rapid withdrawals from commercial banks into CBDCs during times of stress that might ‘lead to bank runs’.  

Concerns among the public range from worries about surveillance and institutional control, to a feeling that CBDCs may be redundant given private stablecoins and instant transfer systems already fulfil many intended functions. 

CBDCs and the Crypto Ecosystem 

It is possible that the rise of CBDCs may disrupt the broader cryptocurrency landscape. By providing a government-backed alternative to private stablecoins, central banks could reduce demand for crypto as a medium of payment, while simultaneously increasing oversight in digital finance. On the other hand, poorly designed CBDCs could drive users towards cryptocurrencies and Bitcoin, highlighting the delicate balance between financial innovation and centralisation of control. 

The future of Money: Compliance without control 

So should we be worried? The answer largely depends on CBDC design. A programmable, identity linked CBDC could enable surveillance and restrict financial freedom, while a privacy-focused model could modernise payments more responsibly. 

An alternative approach would be to strengthen existing compliance tools in the cryptocurrency eco-system, rather than creating state-controlled programmable money. KYC (Know Your Customer) processes already provide accountability at the user level, while KYT (Know Your Transaction) systems allow regulators to monitor suspicious flows, without encroaching on the right of ordinary users or unrightfully freezing them. These frameworks give regulators visibility into digital finance while preserving user sovereignty, privacy, and censorship resistance, reducing the need to compromise individual freedoms for the sake of innovation. 

Conclusion

CBDCs represent both opportunity and risk. Advocates emphasise modernisation, efficiency and inclusion, while critics warn of surveillance and loss of financial freedom. The Governor of the Bank of England's hesitancy in continuing the pilot of the Digital Pound demonstrates that even figures inside central banks are questioning the viability and necessity of these initiatives. 

As Efrat Fenigson warns, programmable money could become the ‘ultimate control apparatus’. Nominis’ standpoint is that the adoption of Bitcoin and other cryptocurrencies, combined with pursued innovation in transaction monitoring and compliance frameworks, will ultimately ensure the financial innovation that central banks are seeking, while also preserving the sovereignty of users’ finances. Robust compliance tools can satisfy institutional demands for oversight and surveillance without censoring or controlling users, offering a path to modernise payments while maintaining financial freedom. 

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