CBDC vs. Cryptocurrency: Why the Digital Dollar Hasn't Appeared Yet

Debates about the digital dollar, also known as CBDC (Central Bank Digital Currency), have taken over the financial world in recent years. While China is already actively developing its digital yuan, and Europe is working on a digital euro, the US remains in a spectator position. For anyone interested in cryptocurrencies and their future, understanding the status and prospects of the American CBDC becomes critically important.

What is behind the abbreviation CBDC?

The digital dollar is not an innovative cryptocurrency in the sense of Bitcoin or Ethereum. It is a proposal to create a digital version of the traditional US dollar, which would be under the full control of the Federal Reserve (Fed).

The key difference lies in centralization. If Bitcoin operates on a decentralized blockchain network without a single controller, then the digital dollar would be managed by a government institution. This means:

• Full government control over the money supply
• No volatility (pegged 1:1 to the regular dollar)
• Complete regulation and transaction tracking
• Integration with the existing banking system

This is a fundamental difference from cryptocurrencies. Where Bitcoin guarantees anonymity and independence, the digital dollar would provide transparency and control.

Political deadlock in the USA

As of April 2025, the situation around the digital dollar remains frozen due to political reasons. In January 2025, President Donald Trump issued an executive order explicitly prohibiting federal agencies from developing or promoting CBDC. This was not just a symbolic gesture — it reflected deeper voter concerns.

Federal Reserve Chair Jerome Powell confirmed the administration’s position, stating that as long as he remains in office, work on the digital dollar will not proceed. Such unanimity regarding rejection is unusual in American politics.

Main objections to introducing the digital dollar:

Privacy concerns. Americans fear that the government will gain access to the full history of each citizen’s financial transactions. This is not an unfounded fear — a digital dollar would indeed allow tracking every payment.

Concentration of power. Conservative circles see CBDC as a way to expand government control over the economy. When all money is in digital form, the government could freeze accounts, change access rules, or even set expiration dates for funds.

Harm to banks. If people can store money directly in the Fed’s wallets, commercial banks would lose deposits. This would undermine their ability to lend and damage the financial sector.

The global race for digital currencies

While the US is stuck in political debates, the rest of the world is moving forward.

China has already implemented the digital yuan (e-CNY), which is actively used in retail payments. According to some estimates, transaction volumes of the digital yuan amount to hundreds of billions of dollars.

The European Central Bank has accelerated the development of a digital euro, seeing it as a way to respond to the growing influence of American stablecoins (USDT, USDC) in international trade.

The Bahamas launched Sand Dollar back in 2020 — the world’s first official CBDC, demonstrating that the technology works.

For the US, this creates pressure. The US dollar is losing its share in international settlements. If Europe and Asia shift their systems to their own digital currencies, American currency influence could decline.

Economic consequences of non-implementation

The absence of a digital dollar already has consequences:

Stablecoins fill the void. USDT and USDC dominate crypto trading pairs precisely because they provide stability. If an official digital dollar existed, demand for these assets might change.

International settlements become more complicated. Companies and countries are seeking alternatives. Some consider the digital yuan or BRICS currencies as ways to bypass the dollar system.

Innovation lag. American fintech companies have fewer opportunities to experiment with digital currencies in an official environment.

Technical realities: how it would work

Hypothetically, if a digital dollar is ever implemented, its architecture would differ radically from Bitcoin.

The system would not be decentralized. Unlike Bitcoin’s blockchain, which operates on thousands of independent nodes, the digital dollar would run on centralized Fed servers.

Use of DLT might be possible. Some experts suggest that the Fed could use distributed ledger technology (DLT) to enhance reliability, but this does not necessarily mean blockchain in the traditional sense.

Wallets and access. Citizens would store digital dollars in apps that could be linked to banks or directly to the Fed.

Security and encryption. All operations would be protected by cryptography and digital signatures, but this would not make the system decentralized.

Comparison: digital dollar vs. cryptocurrencies

Impact on the crypto market

If a digital dollar is ever realized, its influence on the crypto industry will be significant:

Stablecoins will lose their advantage. If USDT and USDC become just private alternatives to the state digital dollar, they will lose some of their appeal.

Cross-border payments will simplify. This could reduce demand for cryptocurrencies in international transfers.

Regulation will intensify. Successful implementation of a government CBDC could lead to tighter control over private cryptocurrencies.

Why the digital dollar is stuck

Three main obstacles:

Political. Both sides of the political spectrum oppose CBDC, but for different reasons. The right fears control, the left fears lack of privacy for vulnerable groups.

Technological. Building infrastructure capable of handling trillions of dollars in daily transactions is a complex task.

Social. About 45 million Americans do not have smartphones or constant internet access. Digitalizing finance would exclude them.

Recommendations for investors

While the digital dollar remains a concept:

• Monitor news about CBDCs in other countries — they provide clues about the future of the US
• Consider the risk of transitioning from USDT/USDC to government stablecoins
• Explore projects related to digital currency infrastructure
• Remember that the digital dollar is not an enemy of decentralized cryptocurrencies; it’s just a different path

Summary

The digital dollar presents a paradox: its logic is undeniable from a government perspective, but its implementation is politically impossible. The US is stuck in a situation where delay becomes risky — the whole world is moving toward digital currencies, and America remains stationary.

This creates interesting opportunities for crypto investors. While governments fight for control, decentralized assets continue to accumulate utility and user networks. The question is not whether the digital dollar will happen, but how much it will matter in a world where alternatives are already entrenched.