As the global financial system continues to evolve, digital currencies are no longer a speculative thought experiment. They are quickly becoming a subject of practical implementation and international policy debate. At the heart of this transformation are central bank digital currencies (CBDCs), which are now being piloted, reconsidered, or quietly shelved by central banks around the world. One of the field’s foremost experts, John Kiff, formerly of the Bank of Canada and the International Monetary Fund, has been at the forefront of these developments. Kiff, who now advises governments globally on CBDC strategy, recently reflected on the evolution of digital money—offering both cautious optimism and clear-eyed realism about its future.
From Central Bank Vaults to Distributed Ledgers
The initial thrust of CBDC experimentation focused heavily on wholesale applications, aimed at modernizing large-value interbank settlements through distributed ledger technologies (DLT). Projects like Project Jasper in Canada and Project Stella by the European Central Bank (ECB) and Bank of Japan sought to replace traditional real-time gross settlement systems (RTGS) with blockchain-based alternatives. The outcome: most concluded that existing centralized infrastructure was more efficient than early DLT prototypes.
Yet wholesale CBDC is staging a quiet comeback. New use cases such as atomic settlement—where transactions in assets and payments occur simultaneously—are gaining traction. The Swiss National Bank’s Project Helvetia, for example, is now running in pilot phase, exploring atomic settlement of securities on blockchain infrastructure. Similar experiments are underway at the ECB, albeit under more generic terminology like “central bank money on DLT platforms,” deliberately avoiding the label „wholesale CBDC.“
This growing interest in wholesale CBDC is closely tied to the rise of tokenized deposits, a new financial instrument where bank deposits exist in digital token form. These systems require a settlement asset, and wholesale CBDC is a natural candidate. As Kiff notes, tokenized systems can offer substantial efficiency gains—particularly in cross-border payments and high-value security transactions.
The Retail Conundrum
If wholesale CBDC is evolving steadily, the outlook for retail CBDC—digital currency designed for use by the general public—is more uncertain.
Central banks in Canada, Sweden, and the United Kingdom have paused or downsized their retail CBDC programs. Others, like the Federal Reserve, have expressed skepticism about the need for a retail CBDC in a country where digital payments are already ubiquitous. „It’s a solution in search of a problem,“ Kiff said, echoing a view expressed by the UK’s House of Lords.
Still, the European Central Bank continues to push forward with its Digital Euro project, citing the need for strategic autonomy in payments and cross-border interoperability across the Eurozone. With €1.2 billion earmarked for development, the ECB is investing heavily in infrastructure, privacy-preserving technologies, and a future launch strategy that may take another four to five years.
One of the key lessons from early adopters like Nigeria, the Bahamas, and the Eastern Caribbean Central Bank is that technology alone is not enough. These initiatives have struggled with low adoption, often due to a lack of merchant integration, insufficient education campaigns, and poor coordination with the banking sector. In Nigeria’s case, commercial banks were reportedly caught off-guard by the central bank’s rollout, resulting in passive resistance to the eNaira.
Moreover, central banks are reluctant to allow remuneration (interest payments) on retail CBDCs, fearing it could disrupt traditional banking models. Yet Kiff argues that tiered remuneration, where only small holdings earn modest interest, could encourage adoption while mitigating the risk of mass flight from bank deposits. Such proposals remain largely theoretical for now.
Stablecoins and the Search for Singleness
Another force reshaping digital currency debates is the rise of stablecoins, privately issued digital currencies pegged to fiat money. Their growing influence, especially in emerging markets and decentralized finance, has sparked both enthusiasm and concern among regulators.
Kiff envisions a future where stablecoins could become dominant—but only if central banks allow them to be backed by reserves held at the central bank. This would enhance trust and ensure parity with traditional forms of money, addressing long-standing concerns about the „singleness of money“—a core principle in monetary systems.
„If central banks regulated stablecoin issuers like banks, and backed their reserves at the central bank, we’d have stability, transparency, and competition,“ Kiff noted. Such a model, sometimes referred to as synthetic CBDC, could offer the innovation of private sector solutions with the stability of central bank backing.
However, political and regulatory resistance remains. In Europe, policymakers have so far resisted allowing stablecoin issuers access to central bank balance sheets—fearing the implications for monetary sovereignty and financial stability.
Permissionless Innovation vs. Controlled Environments
Perhaps the most contentious topic is the infrastructure itself. Most CBDC pilots today operate on permissioned, closed blockchain networks. But critics argue that permissionless platforms—public blockchains like Ethereum—offer greater composability and innovation.
„The real innovation is happening in permissionless environments,“ said Kiff, pointing to projects like JPMorgan’s recent issuance of deposit tokens on public networks. A forthcoming IMF paper, he hinted, may explore these ideas further.
Kiff, who refers to financial architecture as “Lego bricks,” emphasizes the importance of modularity and composability for future-proof systems. In his view, financial systems of the future will be made up of interoperable components: digital cash, tokenized deposits, and programmable assets—all seamlessly connected.
A Fork in the Road
The debate is far from settled. Some nations will lean on fast payment systems, like Brazil’s wildly successful PIX, which achieved mass adoption in under two years. Others, like Europe, will experiment with CBDC as a public good, emphasizing privacy and resilience.
As central banks navigate this terrain, the choices they make today will define the shape of digital money for generations.
“There’s no one-size-fits-all,” Kiff said. “But we are in the middle of a fundamental rethinking of money. And we’re just getting started.”
—
This article was produced based on public dialogue between John Kiff and host Jonas Gross on the BFRR podcast.
Paper on tiered remuneration by Ulrich Bindseil
Kiffmeister Daily Blog on digital money
Bitcoin, Fiat & Rock’n’Roll Website
Bitcoin, Fiat & Rock’n’Roll Telegram Channel
Relai*: Buy Bitcoin with Relai – you can do a one-time purchase or savings plan: Click here. Use the referral code „ROCK“ to reduce transaction fees by 0.1% while supporting Bitcoin, Fiat & Rock’n’Roll.
Value4Value Podcast Streaming: Support our podcast by listening to our episodes on the Fountain Podcast App. This way, if you wish, you can support us „Value4Value“ while listening to the podcast. You can find us on the Fountain Podcast App here: Click here
Disclaimer: The content of this podcast reflects the private opinions of the hosts, serves exclusively for general information purposes, and does not constitute investment advice. Always remember: Do your own research – inform yourself before making any investment decisions, such as buying Bitcoin. First, try to understand what Bitcoin is and how to store it. This podcast does not provide financial advice. Note that the co-hosts might be invested in crypto assets. Read more on our website: Click here
All links marked with „*“ are affiliate links. If you use these links for purchase, the podcast receives a small share of the revenue without any additional costs to you. On the contrary, affiliate links often include discount promotions, so you can even save money. We would appreciate it if you use these links to support us. Thank you very much!