Central bank digital currency what is it?

The forms of money we use today

The banknote in your pocket and the balance you see in a banking app are the same Turkish lira, but in law they are not the same thing. The difference lies in whose debt the money is whose debt because it is. The banknote is a direct liability of the central bank. The money in a bank account is the bank's debt to you.

The highlighted row of the table fills a gap that was previously empty: money that is at once central bank money, digital and open to everyone. The classification that Bech and Garratt of the Bank for International Settlements call the "money flower" is the source of this comparison.

Retail and wholesale

Retail CBDC it is designed for citizens and businesses to use in everyday payments. Wholesale CBDC is used only for large payments between banks and financial institutions. The subject of public debate on privacy and surveillance is retail CBDC; the CBDC-SPAR research also examines expectations concerning retail CBDC.

How it is distributed: three architectures

According to the classification by Auer and Böhme, there are three main models for retail CBDC:

Direct model

The central bank holds all accounts and processes payments itself. It is the model that most narrows the intermediary role of banks.

Indirect model

The citizen holds a claim against an intermediary; the central bank holds only the intermediaries' aggregate positions.

Hybrid (two-tier) model

The money remains a liability of the central bank, while banks and payment institutions provide wallets and payment services. It is the model most discussed today.

According to the Central Bank of the Republic of Türkiye's reports, the Digital Turkish Lira is designed with a two-tier structure: the central bank is responsible for issuance, and intermediary institutions are responsible for user access. For details, you may consult the Digital Turkish lira guide .

Account-based or token-based?

In an account-based design, money is the balance in a verified account; to validate a transaction, the identity of the account holder is known. In a token-based design, money is a digital unit held by its owner; to validate a transaction, it is known that the token is genuine. Although this choice appears technical, it directly affects privacy, what happens in the event of loss or theft, and legal character.

Common principles of central banks

The framework published in 2020 by the Bank for International Settlements and seven central banks sets out three core principles for CBDC design:

1. Do no harm: A CBDC should not disrupt monetary policy or financial stability.
2. Coexistence: A CBDC should complement cash and other forms of money, not replace them.
3. Innovation and efficiency: A CBDC should support competition and innovation in payments.

The situation in the world

• Overall pictureOf the 93 central banks that took part in the Bank for International Settlements' 2024 survey, 85 are working on retail, wholesale or both types of CBDC.
• Euro areaThe European Central Bank's preparation phase ran from November 2023 to October 2025. The bank announced that, if EU legislation is adopted in 2026, a digital euro could be issued in 2029. It is stated that the digital euro would complement cash and be free for basic use.
• ChinaAccording to the People's Bank of China's announcement, from 1 January 2026 the digital yuan (e-CNY) moved from a tool resembling cash to a new management framework approaching digital deposit money.
• United StatesA presidential executive order dated 23 January 2025 prohibited federal agencies from any action to establish, issue or promote a CBDC.
• TürkiyeThe Central Bank of the Republic of Türkiye published the second-phase progress report of the Digital Turkish Lira Project on 24 November 2025; a decision on circulation has not yet been made.

Why is it debated?

Privacy and surveillance

A cash payment leaves no trace. In a digital payment, the key question is who holds the record and who can access it under what conditions.

Outflows from banks

If people rapidly convert bank deposits into CBDC in a crisis, banks' capacity to extend credit could weaken. This is why measures such as per-person holding limits are being discussed.

Programmability

Adding rules to payments (for example, conditional payment) could bring efficiency. However, rules that limit where money can be spent raise serious objections in terms of payment autonomy and property rights.

Access and inclusiveness

How people without a phone or bank account, or with limited digital skills, will be able to access it.

Legal safeguards

Whom to approach, and how, in cases of erroneous payment, fraud or infringement of rights.

How we plan to measure these expectations in the research section we explain. Short answers to the questions citizens ask most often on the home page.