<figure class="wp-block-image size-large"><img width="325px" height="183px" srcSet="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/09213524/cbdcs-vs-crypto-375x211.webp 375w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/09213524/cbdcs-vs-crypto-662x372.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/09213524/cbdcs-vs-crypto-768x432.webp 768w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/09213524/cbdcs-vs-crypto.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/08/09213524/cbdcs-vs-crypto.webp" alt="cbdcs vs crypto" class="wp-image-3651"/></figure>



The crypto movement aims to introduce an alternative financial system where users hold the power, while central bank digital currencies are increasing the control of governments and existing financial institutions.



This means that despite sharing similar underlying technology, cryptocurrencies and CBDCs could not be more different. 



With 11 <a href="https://www.thecoinzone.com/global-macro/the-hidden-battle-for-digital-finance/" data-wpil-monitor-id="657">central bank digital currencies</a> already existing in the world today, it has never been more important to understand why they are not a replacement for crypto.



<h2 class="wp-block-heading tablecontent">Central Bank Digital Currencies (CBDC) Are Already Here</h2>



<a rel="noreferrer noopener" href="https://www.thecoinzone.com/cbdc/central-bank-digital-currencies-cbdcs" target="_blank">CBDCs</a> are central bank digital currencies. Essentially, they are digital versions of fiat currencies that are entirely owned and operated by a country’s central financial authority.



 The birth of CBDCs can be attributed to the immense popularity of the <a href="https://www.thecoinzone.com/blockchain/ashdraked-meaning/" data-wpil-monitor-id="39">crypto and blockchain</a> movement. Over the past few years, governments and financial authorities have taken note of the ways in which <a href="https://www.thecoinzone.com/global-macro/nobody-trusts-treasuries-so-tether-stepped-in/" data-wpil-monitor-id="1224">digital currencies</a> can improve aspects of our everyday lives.



As a result, central banks across the world have been experimenting with ways to use <a href="https://www.thecoinzone.com/blockchain/censorship-resistance/" data-wpil-monitor-id="1580">blockchain technology to create digital</a> versions of existing currencies.



Using a tool provided by an American think tank known as the Atlantic Council, we can see just how abundant CBDCs have become in the world today.



Findings from the <a href="https://www.atlanticcouncil.org/cbdctracker/" target="_blank" rel="noreferrer noopener">Central Bank Digital Currency Tracker</a> show that 19 of the G20 countries are currently in an “advanced stage” of CBDC development. In addition, 130 countries are exploring a CBDC.



Further, 11 countries have fully launched their own digital currencies. The most notable of these is China, where the country’s digital yuan (e-CNY) is reportedly accepted at over 5.6 million stores. 



In fact, according to the ABC, over $22.2 billion dollars of value has been transacted across 360 million transactions. As of the outlet’s May 2023 <a href="https://www.abc.net.au/news/2023-05-14/why-china-digital-currency-e-cny-concerning-yuan-rmb/102328578">report</a>, thousands of workers in the Chinese city of Changshu are receiving wages entirely in digital yuan.



<h2 class="wp-block-heading tablecontent">CBDCs vs Crypto: Similarities and Differences</h2>



It can be easy to miss the stark differences that exist between CBDCs and cryptocurrencies. After all, both are digital forms of payment that are built on blockchain technology. 



Where CBDCs and crypto differ, however, is in their values, purpose, and who they give power to.



Cryptocurrencies were designed to usher in a new age in which the balance of power in financial systems is given back to the users themselves. When Bitcoin was first outlined back in a <a href="https://bitcoin.org/bitcoin.pdf" target="_blank" rel="noreferrer noopener">2008 whitepaper</a>, its anonymous creator(s) simultaneously introduced the world to blockchain technology. 



Blockchain technology was designed as a way to allow payment networks to exist without the need for any central authority. Whereas fiat currencies are issued out by <a href="https://www.thecoinzone.com/blockchain/centralized-exchanges-vs-banks/" data-wpil-monitor-id="1958">central banks</a> and transactions are facilitated by third party financial middlemen, blockchain technology has enabled Bitcoin and other cryptocurrencies to exist free from the trappings of centralization.



In this sense, decentralization is one of the <a href="https://www.thecoinzone.com/blockchain/the-first-principles-of-crypto-and-blockchain" target="_blank" rel="noreferrer noopener">first principles of the crypto and blockchain movement</a>.



While most cryptocurrencies exist to take power away from central authorities, central bank digital currencies do the exact opposite. They are an expansion of existing financial systems in which a single monetary authority has complete control of the currency itself.



The digital yuan, for instance, is an example of a CBDC. It is entirely controlled and issued by China’s central bank. This means that it is still prone to the same centralization concerns that led to the birth of the crypto movement in the first place. In an article exploring the <a href="https://www.imf.org/en/Publications/fandd/issues/2022/09/Central-bankers-new-cybersecurity-challenge-Fanti-Lipsky-Moehr" target="_blank" rel="noreferrer noopener">increased cybersecurity risks</a> associated with current implementations of CBDCs, the International Monetary Fund (IMF) stated that: “Many of the proposed design variants for CBDCs (particularly retail CBDCs) involve the centralized collection of transaction data, posing major privacy and security risks. [...] Accumulating so much sensitive data in one place also increases security risk by making the payoff for would-be intruders much greater.”



Further, a <a href="https://www.wired.com/story/chinas-digital-yuan-ecny-works-just-like-cash-surveillance/" target="_blank" rel="noreferrer noopener">report</a> by Wired states that CBDCs like the digital yuan actually introduce an increased risk of surveillance and government control. They allow countries to have even greater control over the lives of their citizens.



Whereas cryptocurrencies attempt to give more power to people, CBDCs instead serve as a way for governments to gain more control of how people make payments.



<h2 class="wp-block-heading tablecontent">The Battle Between CBDCs and Crypto</h2>



Since CBDCs and crypto are worlds apart in terms of their intent and implementation, the fact of the matter is that both digital payment forms will continue to exist concurrently.



As has been proven time and time again, cryptocurrencies are here to say. While some governments have attempted to take harsh regulatory stances on crypto in the past, the fact that many cryptocurrencies are decentralized means that governments cannot realistically get rid of them.



Over the last few years, we have seen governments reckon with the fact that cryptocurrencies are here to stay. As a result, many parts of the world have introduced forward-thinking regulation designed to mature—rather than snuff out—the cryptocurrency movement.



Meanwhile, CBDCs are increasingly becoming a part of our world but are merely an extension of the existing powers that governments hold. While we might continue seeing countries promote the adoption of their CBDCs, this adoption is most likely to arrive at the cost of people using cash rather than people using crypto.



This is because someone who is passionate about the crypto movement is unlikely to be a supporter of central bank digital currencies—and vice versa. 



As a result, CBDCs and <a href="https://www.thecoinzone.com/news/texas-mom-cryptocurrency-financial-abuse/" data-wpil-monitor-id="1468">cryptocurrencies will exist as part of parallel financial</a> systems. 



In other words, the battle between cash and crypto is becoming a battle of centralized and decentralized digital currencies.

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