London Daily

Focus on the big picture.
Friday, Oct 17, 2025

What is the difference between digital currency and cryptocurrency?

What is the difference between digital currency and cryptocurrency?

From the Bahamas to Britain, the world's biggest banks are issuing digital currencies to fend off the threat of cryptocurrencies. But how are they different?

From the Bahamas to Britain, the world's biggest banks are jumping on a bandwagon to issue digital cash in a bid to fend off emerging threats to traditional money and to make payments systems smoother.

Worried by the spread of cryptocurrencies, central banks are researching and experimenting with digital currencies.

Still unclear what central bank digital currencies (CBDCs) are? Here's all you need to know.

What is a central digital bank currency?


CBDCs are essentially electronic cash.

Like traditional cash, they would give holders a direct claim on the central bank and allow businesses and individuals to make electronic payments and transfers.

Access to central bank money beyond physical cash has so far been restricted to financial institutions like banks.

Haven't we already been using digital cash?


Using a debit or credit card, or payment app, to purchase coffees or make payments in shops is a form of digital money.

But this is created by commercial banks, based on central bank money credited electronically to their accounts.

The difference is this form of digital cash is not as "risk-free" as a CBDC.

At commercial banks, you could lose your savings if a bank fails as governments usually only insure a certain amount.

Why are central banks so interested?


Firstly, central banks fear losing control over the supply of money and payments systems to cryptocurrencies, such as Bitcoin or even the planned Facebook-backed cryptocurrency Diem.

The spread of forms of payment not overseen by any central or public body could weaken central banks' grip on the supply of money, and economic stability. The threat has grown even deeper as cryptocurrencies are increasingly embraced.

The second reason is as we use less physical cash, a CBDC would ensure that the public has access to central bank money.

They could also offer a new tool for central banks to transmit monetary policy and keep economies stable.

Could they take on cryptos?


CBDC's are unlikely to overtake cryptocurrencies due to their progressively limited supply, Anatoly Crachilov, co-founder and CEO of Nickel Digital Asset Management, told Reuters Global Markets Forum.

"No central bank currency, however digital, can offer scarcity at this stage, as its supply can be inflated by a respective central bank issuing entity".

What would a CBDC look like?


A CBDC could take the form of a token saved on a mobile phone or a pre-paid card. It could also exist in an account directly managed by the central bank or an intermediary bank.

There is nothing to say it should use a blockchain, the technology that powers cryptocurrencies.

The People's Bank of China (PBOC), for instance, said its digital yuan would not rely on a blockchain while Sweden's e-krona, which is currently being tested, is based on a blockchain.

Which countries are leading the way?


China aims to become the first major central bank to issue a CBDC. Its work - part of a push to internationalise the yuan - is advanced. State banks are promoting the digital yuan ahead of a May 5 shopping festival.

Western central banks are taking more time.

The European Central Bank is exploring the launch within the next five years of a digital euro. The Bank of England has stepped up research into what has been dubbed "Britcoin" without making any firm commitments.

The US Federal Reserve has said it will not rush any digital dollar. This year will, however, be important in getting the ball rolling, its chief Jerome Powell has said.

Smaller central banks are also active. The Bahamas last year become the first nation to introduce a CBDC nationwide, and the Eastern Caribbean in April became the first currency union central bank to issue digital cash.

What are the risks?


During an economic crisis, people could rush to withdraw their money. But many CBDCs plan to counter this by putting a cap on holdings.

Any mass migration to a CBDC could also deprive commercial banks of a cheap and stable source of funding.

And commercial bankers in Sweden worry that the availability of mortgages or corporate loans would become dependent on the central bank's appetite for risk.

Meanwhile, emerging economies dependent on foreign currencies such as the dollar, easy-to-use CBDCs could also hasten the decline of domestic sovereign currencies, eroding the influence of monetary policy and potentially destabilising local economies.

Newsletter

Related Articles

0:00
0:00
Close
U.S. Chamber Sues Trump Over $100,000 H-1B Visa Fee
Shenzhen Expo Spotlights China’s Quantum Step in Semiconductor Self-Reliance
China Accelerates to the Forefront in Global Nuclear Fusion Race
Yachts, Private Jets, and a Picasso Painting: Exposed as 'One of the Largest Frauds in History'
Australia’s Wedgetail Spies Aid NATO Response as Russian MiGs Breach Estonian Airspace
McGowan Urges Chalmers to Cut Spending Over Tax Hike to Close $20 Billion Budget Gap
Victoria Orders Review of Transgender Prison Placement Amid Safety Concerns for Female Inmates
U.S. Treasury Mobilises New $20 Billion Debt Facility to Stabilise Argentina
French Business Leaders Decry Budget as Macron’s Pro-Enterprise Promise Undermined
Trump Claims Modi Pledged India Would End Russian Oil Imports Amid U.S. Tariff Pressure
Surging AI Startup Valuations Fuel Bubble Concerns Among Top Investors
Australian Punter Archie Wilson Tears Up During Nebraska Press Conference, Sparking Conversation on Male Vulnerability
Australia Confirms U.S. Access to Upgraded Submarine Shipyard Under AUKUS Deal
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
Brands Confront New Dilemma as Extremists Adopt Fashion Labels
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Erika Kirk Delivers Moving Tribute at White House as Trump Awards Charlie Presidential Medal of Freedom
British Food Influencer ‘Big John’ Detained in Australia After Visa Dispute
ScamBodia: The Chinese Fraud Empire Shielded by Cambodia’s Ruling Elite
French PM Suspends Macron’s Pension Reform Until After 2027 in Bid to Stabilize Government
Orange, Bouygues and Free Make €17 Billion Bid for Drahi’s Altice France Telecom Assets
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
Bessent Accuses China of Dragging Down Global Economy Amid New Trade Curbs
U.S. Revokes Visas of Foreign Nationals Who ‘Celebrated’ Charlie Kirk’s Assassination
AI and Cybersecurity at Forefront as GITEX Global 2025 Kicks Off in Dubai
DJI Loses Appeal to Remove Pentagon’s ‘Chinese Military Company’ Label
EU Deploys New Biometric Entry/Exit System: What Non-EU Travelers Must Know
Australian Prime Minister’s Private Number Exposed Through AI Contact Scraper
Ex-Microsoft Engineer Confirms Famous Windows XP Key Was Leaked Corporate License, Not a Hack
China’s lesson for the US: it takes more than chips to win the AI race
Australia Faces Demographic Risk as Fertility Falls to Record Low
California County Reinstates Mask Mandate in Health Facilities as Respiratory Illness Risk Rises
Israel and Hamas Agree to First Phase of Trump-Brokered Gaza Truce, Hostages to Be Freed
French Political Turmoil Elevates Marine Le Pen as Rassemblement National Poised for Power
China Unveils Sweeping Rare Earth Export Controls to Shield ‘National Security’
The Davos Set in Decline: Why the World Economic Forum’s Power Must Be Challenged
France: Less Than a Month After His Appointment, the New French Prime Minister Resigns
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Sarah Mullally Becomes First Woman Appointed Archbishop of Canterbury
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
US Prosecutors Gained Legal Approval to Hack Telegram Servers
Macron Faces Intensifying Pressure to Resign or Trigger New Elections Amid France’s Political Turmoil
Standard Chartered Names Roberto Hoornweg as Sole Head of Corporate & Investment Banking
UK Asylum Housing Firm Faces Backlash Over £187 Million Profits and Poor Living Conditions
UK Police Crack Major Gang in Smuggling of up to 40,000 Stolen Phones to China
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Trump Proposes Farm Bailout from Tariff Revenues Amid Backlash from Other Industries
FIFA Accuses Malaysia of Forging Citizenship Documents, Suspends Seven Footballers
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
×