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What is a CBDC and Why Do Crypto Users Hate the Idea?

By Evan Jones03/14/2024


Blockchain technology doesn’t require cryptocurrencies in order to function, despite that being the current infrastructure of most blockchain networks. What makes blockchain technology so useful is its ability to be a distributed ledger that can be traced with irreversible transactions and fast settlement speeds. 

This means that a government could use blockchain technology to replace the current payment systems which we use, such as cash, bank transfers, and more. If nothing else, it can replace underlying redundancies that exist within the current financial system. These payment systems run by a central government are referred to as Central Bank Digital Currencies (CBDCs), but what exactly are they, and why do crypto users hate the idea?

What’s a CBDC?

It may seem as though governments, such as the US and China, dislike the idea of digital assets, but the reality is that they don’t like the idea of a financial system in which they have no control. So, while they don’t necessarily like Bitcoin, Ethereum, and other crypto assets, they’re fine with a digital currency they have control over. These currencies are referred to as Central Bank Digital Currencies. 

CBDCs work no differently than your traditional national currency, except that it’s all digital. They’re backed by the government and units have the same value as a cash unit of the same value would (assuming cash is still used). You can think of CBDCs like a stablecoin for any national currency. They would have no price fluctuation, and could be used to help bring more financial inclusivity and access to those without it currently.


The People’s Bank of China (PBOC) has already implemented a test program for their CBDC, the e-CNY. Though it hasn’t taken off as a way for people to interact with each other financially, the Chinese government seems to be pivoting to another use for the digital Chinese yuan: international trade.

As already mentioned, there are a lot of redundancies in the current financial system. This is because the correspondent banking system, which is used for settlement of payments between banks across varying jurisdictions, hasn’t kept up with modern technology according to the Bank of International Settlements (BIS)

Project mBridge

Project mBridge is an e-CNY pilot that is testing whether infrastructure for a CBDC could be used for large-value, cross-border payments. If it can be, then the payment rails could compete with the current USD-dominated one. 

BIS has been working with the PBOC and the central banks of Hong Kong, the United Arab Emirates, and Thailand on this project. Over the course of six weeks in summer to fall 2022, 20 commercial banks used a custom blockchain to settle $22 million in cross-border transactions using CBDCs. 

CBDCs vs Crypto Assets

While cryptocurrencies and CBDCs are both digital currencies, there is a difference in their ethos. Crypto assets like Bitcoin (BTC) are decentralized, whereas CBDCs have a single central authority in the form of the federal government. 

This means they have even more control over your finances than they already do. Governments could track all your financial transactions, freeze your accounts if they want, and even just reverse or possibly force transactions to occur. In a time of war, with CBDCs it’s likely that you wouldn’t be able to access your funds because the government could simply prevent it. 

Why Crypto Users Hate the Idea

Though it was already mentioned, the main reason why those within the cryptocurrency sector hate the idea of CBDCs is their lack of decentralization. There are very few people who would likely agree that it would be good for a government to have full control over a financial system, and CBDCs are somewhat of a step towards that. 

Crypto users also hate the idea of the lack of privacy which a CBDC would likely present. All your financial transactions could be tracked and tied to your identity. Interestingly enough, the PBOC has a way for Chinese citizens to use their digital yuan without providing personal information but simply a phone number. They also apparently recently passed laws to prevent cellular companies from selling personal information to the government. 

Those sorts of laws would need to be in place before any crypto user would accept the use of a CBDC system, and are a big part of the global CBDC debate. If governments could implement a global financial system that uses CBDCs to reduce costs for residents while maintaining a modicum of privacy, then they may end up being a great advancement for traditional finance, but only time will tell. 

Closing Thoughts

Though CBDCs are still in their infancy, much like cryptocurrencies, they are already sparking much debate between various communities. There is no doubt that the current financial system needs to be overhauled, as redundancies and high fees for even simple transactions are far too frequent, not to mention the slow time to settlement that these same transactions have. 

If CBDCs can find a happy medium between the ideals of decentralization that the crypto community has, and the control that the government wants, then they may end up being less terrible than some are expecting.

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Evan Jones


Evan entered the crypto scene in 2017, attracted to the many disruptive possibilities that blockchain could have on current world systems. He has a keen interest in decentralized services, payment processing, and viable NFT use cases such as event ticketing. He spends his days writing with his dog Kobe under his feet, if not on his lap.

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