How Does CBDC Development Affect The Crypto Market?

Introduction

CBDC is reshaping the global financial landscape, and countries are adopting different strategies to respond to this transformation. Digital currencies demonstrate enormous potential in improving transaction efficiency and enhancing financial inclusion, but challenges such as technology, privacy, and regulation still need to be overcome.

Current Status and Trends of CBDC Development

Central Bank Digital Currency (CBDC) as an innovative form of currency has become a focal point in the global financial technology sector. According to statistics, as of April 2025, central banks in 134 countries and regions worldwide are actively exploring CBDCs.

However, the development of CBDC is not smooth sailing. Most countries are still in the research and pilot phase, and the promotion of retail CBDC is progressing relatively slowly. In contrast, wholesale CBDC has attracted more attention, with institutions such as the European Central Bank actively exploring wholesale CBDC solutions based on distributed ledger technology.

The impact of CBDC on the crypto market

Central Bank Digital Currency (CBDC) has had a profound impact on the crypto market. According to online data, 134 countries are currently in the exploration or pilot phase of CBDC, indicating that CBDC is rapidly developing globally, causing significant disruptions to the cryptocurrency market. The widespread adoption of CBDC has reduced the volatility of the cryptocurrency market while also driving mainstream adoption. However, this has brought challenges in terms of regulation and stability. CBDC aims to improve financial inclusion and payment efficiency, which may affect the use cases of certain cryptocurrencies.

According to the report from ResearchAndMarkets, the global stablecoin and CBDC market is expected to grow from $25.2 billion in 2024 to $33.11 billion in 2025, with a compound annual growth rate of 32.8%. This rapid growth indicates that both forms of digital currencies play an important role in the financial ecosystem. However, the development of CBDCs may impact the demand for globally dollar-backed stablecoins, leading to a shift in liquidity towards government-backed digital currencies. This shift could alter the balance of digital finance, affecting the way of cryptocurrency trading and cross-border payments.

The impact of CBDC on the financial system

The promotion of CBDC will have a profound impact on the existing financial system. First, CBDC is expected to improve the efficiency and security of the payment system. For example, the digital euro project being explored by the European Central Bank aims to achieve features such as “cost-free, pan-European coverage, privacy protection, and offline use.” These features will provide users with a more convenient and secure payment experience.

Second, CBDC may change the business model of traditional banks. With central banks directly providing digital currency to the public, commercial banks may face the risk of deposit outflows. To address this challenge, institutions such as the Bank of England are considering setting limits on CBDC holdings. This approach aims to balance the relationship between financial innovation and financial stability.

In addition, CBDCs may also promote the development of cross-border payments. Some government agencies are advancing multilateral CBDC platform projects, such as the mBridge project, aimed at improving the efficiency, speed, and transparency of cross-border payments. These measures are expected to reduce the cost of cross-border transactions and promote international trade and financial cooperation.

Conclusion

CBDC is reshaping the global financial landscape, and countries are actively exploring implementation strategies. Despite facing challenges such as privacy protection and technical realization, CBDC still demonstrates huge potential to improve payment efficiency and promote cross-border transactions. Future development will focus on balancing innovation and stability, driving the financial system towards a more efficient and secure direction.

Risk reminder: The promotion of CBDC may cause bank runs, affect the effectiveness of monetary policy, and the different progress and strategies of various countries may lead to a global financial system imbalance.