CBDCs and the future of state-controlled money

Trust in institutions may be weakening, but money is quietly undergoing one of its biggest transformations in decades. What was once physical, tangible, and largely invisible in its movement is becoming digital, traceable, and, in some cases, programmable.

While much of the public conversation has focused on cryptocurrencies like Bitcoin and Ethereum, a parallel development has been unfolding in the background. Governments themselves are now entering the digital currency space, not to decentralize money, but to reshape and reinforce their role within it. The result is the rise of Central Bank Digital Currencies, better known as CBDCs.

What CBDCs really are

At their core, CBDCs are simply digital versions of national currencies issued by central banks.

A digital euro, a digital dollar, or a digital pound would function as official state money, just in electronic form. Unlike cryptocurrencies, which operate on decentralized networks without a central authority, CBDCs are issued and controlled by central banks under state authority.

In other words, if Bitcoin was created to remove banks from the equation, CBDCs are designed to bring them back to the center, but in a more technologically advanced way.

Why governments are moving now

The timing of this shift is not accidental.

Around the world, cash usage is declining, digital payments are becoming the norm, and cryptocurrencies have introduced a new model of financial independence that governments can no longer ignore. At the same time, geopolitical tensions, sanctions, and concerns over financial sovereignty are pushing countries to rethink how money moves across borders.

According to the Bank for International Settlements, more than 130 central banks are currently exploring, developing, or piloting CBDCs, representing the vast majority of the global economy. Undoubtedly, this is not a niche experiment, it is a coordinated global shift.

Europe, Portugal, and the digital euro

In Europe, this transformation is taking shape through the work of the European Central Bank, which is actively developing a digital euro.

The project began in 2021, with the European Central Bank entering a preparation phase in late 2023, with a focus on testing design choices, engaging with financial institutions, and assessing how a digital euro could function alongside existing payment systems.

According to recent updates from the ECB, a final decision on issuance is expected only after this phase is completed, with strong emphasis placed on privacy protections and financial stability.

Countries like Portugal are part of this broader European effort. The Banco de Portugal, as a member of the Eurosystem, contributes to technical research, policy discussions, and consultations surrounding the digital euro.

In recent public communications, ECB officials have highlighted the importance of ensuring that any future digital euro remains accessible, secure, and complementary to cash, rather than replacing it.

The motivation behind the digital euro is not purely technological. At the European level, it reflects a broader effort to strengthen the resilience of the financial system, reduce dependence on non-European payment networks, and maintain monetary sovereignty in a rapidly evolving digital landscape. A digital euro would also provide a public alternative to private payment platforms and stablecoins, reinforcing the role of central banks in the digital economy.

At the same time, discussions within Portugal mirror broader European concerns. Questions around privacy, data protection, and the role of commercial banks remain central. The challenge lies in finding the right balance between innovation and regulation, efficiency and individual financial freedom.

CBDCs vs crypto

Despite their similarities in name, CBDCs and cryptocurrencies are fundamentally different in philosophy. Cryptocurrencies were built on the idea of decentralization, reducing reliance on institutions and giving individuals more control over their money. CBDCs, on the other hand, reinforce the role of the state. They are centralized by design, issued and managed by central banks, and built with compliance, oversight, and monitoring in mind.

While some CBDCs may use elements of blockchain or distributed ledger technology, they do not operate like public cryptocurrencies. Access is typically permissioned, transactions can be monitored, and authorities retain control over the system. In contrast, networks like Bitcoin are open and decentralized, where no single entity can control or alter transactions.

This distinction is essential. Crypto was designed to function outside traditional systems of control, while CBDCs are being developed to modernize and strengthen them. The difference is not just technological, it is fundamentally about who holds power over money.

The question of control and privacy

This distinction raises important questions, particularly around privacy and control. Unlike cash, which allows for anonymous transactions, a CBDC system could theoretically enable governments to track financial activity in real time. Some models even introduce the concept of “programmable money,” where funds could be restricted, directed, or conditioned based on predefined rules.

Supporters argue that this could improve efficiency, reduce fraud, and enhance the effectiveness of monetary policy. Critics, however, warn that it could also expand financial surveillance and give governments unprecedented control over how our money is used.

What this means for Lebanon

Lebanon has not been absent from the global conversation around central bank digital currencies. Over the past few years, the Banque du Liban has shown interest in developing a digital version of the Lebanese pound as part of broader efforts to modernize the financial system.

The idea gained public attention in 2021, when officials announced plans to explore a national digital currency, presenting it as a potential tool to improve payment systems and restore some degree of confidence in a collapsing financial environment. Since then, however, not much has been done, and progress has remained largely behind the scenes. While the central bank has continued studying the concept and exploring technical partnerships, no clear timeline or implementation framework has been announced.

In theory, a digital Lebanese currency could help streamline transactions, support digital payments, and improve the traceability of money flows in an economy where informality has long been widespread. It could also facilitate remittances from the Lebanese diaspora, which remain a critical lifeline for many households.

According to industry sources cited by The Beiruter, private-sector initiatives aimed at supporting government digitization were ready to be deployed but have struggled to move forward due to institutional constraints and ongoing governance challenges.

In practice, the challenge is far more complex. The effectiveness of any CBDC depends not only on technology, but on the credibility of the institution issuing it. In Lebanon’s case, years of financial collapse, banking restrictions, and loss of public trust create a fundamental barrier.

A digital currency cannot, on its own, resolve structural weaknesses in governance or restore confidence in a system that many citizens no longer trust.

Lebanon’s experience reveals a bigger truth about CBDCs. While they are often presented as tools for modernization and efficiency, their success ultimately depends on the strength and legitimacy of the institutions behind them. Without that foundation, even the most advanced digital infrastructure may struggle to gain adoption.

Who controls money tomorrow?

This is the paradox at the heart of digital money. Technology can improve systems, but it cannot replace trust. And trust, once broken, is not easily rebuilt through code alone.

What is clear is that the future of money will not belong exclusively to one model. It is unlikely to be fully decentralized, nor entirely controlled. Instead, it is emerging as a hybrid system in which cryptocurrencies, traditional banking, and state-issued digital currencies coexist, compete, and shape one another.

In that evolving industry, CBDCs represent more than just a new form of payment. They highlight a shift in how governments view money itself, not just as a medium of exchange, but as a tool of policy, control, and influence.

However, one question remains increasingly important. In a digital financial system, who ultimately controls money, and who decides how it can be used?