The global competition to transform traditional currency systems into digital currency is currently driving central banks across the world to create central bank digital currencies (CBDCs).
Most countries are executing the deployment of digital currency in operational settings. This means that testing is currently happening in real environments. Other countries, including the United States, are working on legal and technical structure development alongside privacy and financial oversight considerations.
The key debate of privacy and autonomy in investing in digital currencies is that of KYC. Most government regulators want banks and financial institutions to implement KYC policies, especially when it concerns financial transactions. This is understandable because traditional transactions are done in fiat, which are legal government tenders.
However, that is not the case with cryptocurrencies. Since no government owns and controls assets like Bitcoin, investors who value privacy are turning to crypto platforms to buy Bitcoin without KYC. These no-KYC crypto wallets allow users to buy and use cryptocurrencies without providing any personal information or ID.
United States: Policy-Heavy, Privacy-Cautious CBDC Policy
Multiple drafts from the Federal Reserve have been released over the past three years without definitive approval to launch a digital dollar system. However, these documents focus on preserving privacy, governance controls, and user involvement. The “Electronic Currency and Secure Hardware Act” (eCASH Act) was constitutionally passed as a bill in 2022. The bill proposes a digital dollar that functions like cash, being anonymous, offline-capable, and not tied to a centralized ledger.
The Federal Reserve released the discussion paper in 2022, establishing three essential requirements; privacy protection, anti-illegal use standards, and sustained global dominance of the dollar currency. The U.S. is adopting a cautious approach toward implementing CBDC compared to China’s rapid expansion and the slower timeline established by the EU.
Israel: Testing for Innovation, Waiting on Europe
The Bank of Israel released an extensive CBDC draft design in March 2025. Introducing a digital shekel with multipurpose functions that enhances payment system efficiency and promotes innovation. The system incorporates offline mode features and programmable functions to implement smart contracts. The central bank established the “Digital Shekel Challenge” as a competition seeking fintech technical uses for its future CBDC. Despite the robust planning, Israeli authorities remain cautious about deployment, waiting for more European countries to launch theirs first.
China: Full Steam Ahead
The People’s Bank of China (PBoC) is the world leader in CBDC development. Cities in China implemented digital yuan (e-CNY) pilots in 2020 and established its integration within public transport systems, e-commerce networks, and payroll distribution networks. Unlike the U.S., China selects different priorities in the financial system by avoiding anonymous approaches. The e-CNY system operates through a centralized framework that allows for both time-responsive tracking and route-ability through a robust structure. The government claims this tool helps fight tax evasion and corruption, but privacy advocates oppose this system.
China had reportedly expanded the CBDC pilot phase to over 260 million users by 2023, cementing its lead in real-world CBDC applications.
European Union: Privacy by Design
The European Central Bank (ECB) presents extensive information about digital euro architecture and instructions for privacy safeguards, system connections, and international usability. The ECB’s strategy differs from China’s by giving users complete autonomy over choice, including online and offline access to the CBDC while upholding user privacy.
The ECB finalized the investigation phase in October 2023 before starting the preparation stage to develop final technical and regulatory systems. Intermediaries must collect limited data as part of the anti-money laundering requirements for the CBDC deployment.
What Makes the U.S. Approach Unique?
The United States values the protection of constitutional rights, user privacy rights, and democratic principles above quick implementation. The U.S. maintains different approaches towards CBDC draft proposals, which vary between the fashioning of digital wallets affiliated with the Fed and cash-replica systems.
The U.S. also prioritizes central bank independence and political consensus when developing the centralized digital currency because key governmental agencies such as the Federal Reserve, Treasury, and Congress dictate the formation and adoption of cryptocurrency. The slow development process may produce a CBDC that wins wide public trust in the future.
Final Thoughts
Technically, these three countries are leading the race because they have already launched their CBDCs; The Bahamas, Jamaica, and Nigeria. However, they lack widespread adoption among other challenges. Digital currencies are a universal trend among central banks operating at different speeds worldwide. Currently, 134 countries, at different phases, are actively working towards establishing a CBDC.
Each nation adopts its unique digital currency strategies based on the political, cultural framework, and economic realities.
