TITLE: CBDC and the Future of Money: What Does It Mean for Ordinary People?
SUMMARY: More than 130 countries are now studying or testing central bank digital currencies (CBDCs). This article explains the definition of CBDC, the factors behind its resurgence — from the decline of cash to financial inclusion — as well as its direct impact on daily life, privacy and security risks, systemic challenges to commercial banks, and the future prospects of CBDC in Malaysia and around the world.
When China launched the public trial of e-CNY in several cities in 2020, many regarded it as a distant future technology experiment. Today, more than 130 countries are studying or developing their own CBDCs — from the Sand Dollar in the Bahamas to eNaira in Nigeria. This surge is not just following a trend; it reflects a deep shift in the concept of money itself.
What Is CBDC?
CBDC is a form of digital national currency issued and fully guaranteed by the central bank. It is not a cryptocurrency, nor a private product: it is a direct liability of the central bank — similar to paper money, but in digital format. CBDC is designed for use in daily payments, fund transfers, and savings, usually through digital wallets or smart cards. For example, e-CNY allows transactions without an internet connection using NFC technology — a feature that emphasizes infrastructure resilience.
Why Are Countries Racing to Develop CBDCs?
Four main factors are driving this development. First, the decline in cash usage: in Sweden, only 9% of transactions involved paper money in 2022, prompting Riksbank to develop e-krona. Second, increased efficiency in payment systems — both domestic and cross-border — with reduced costs and transfer times. Third, new opportunities in monetary policy implementation, such as direct interest payments to individuals during economic crises. Fourth, the potential to expand financial inclusion: eNaira in Nigeria, for example, targets 80% of the population who do not have a bank account.
How Will CBDC Change Daily Life?
Changes will occur gradually. For ordinary people, retail payments can become faster and cheaper — especially small transactions. Social assistance channels can also be simplified: after Hurricane Dorian, the government of the Bahamas directly distributed aid to citizens' digital wallets. However, every transaction will leave a digital trace accessible to the central bank. In China, e-CNY offers pseudonymity — but the government still has the right to access data under certain circumstances. This raises an important question: should convenience come at the cost of privacy?
What Are the Challenges and Risks?
Cybersecurity risks are the main threat. CBDC systems will be prime targets for cyberattacks, requiring high-level protection. Technical disruptions can also interfere with access to money — a real risk in systems that completely rely on digital infrastructure. Macroeconomically, CBDC has the potential to weaken the role of commercial banks: if people store money directly with the central bank, the loan market could be affected. To avoid a 'digital bank run,' some central banks are considering holding limits — such as the European Central Bank's proposal for a digital euro around €3,000.
Where Is the Future of Money Heading?
CBDC will not replace cash or cryptocurrencies, but will coexist with them — each playing different roles. Cash remains relevant for those who prioritize absolute privacy; cryptocurrencies function as speculative instruments or digital assets; while CBDC is designed for safe, efficient, and state-guaranteed daily transactions. In five to ten years, the launch of retail CBDC in more countries seems almost certain. In Malaysia, Bank Negara Malaysia is studying CBDC through joint research projects with other central banks. The best preparation for ordinary people is to understand how to use digital wallets, practice basic cybersecurity measures, and actively follow official guidelines from local financial authorities.