CBDC vs. Cryptocurrency: Competition or Collaboration Towards the Future of Digital Finance?

In the midst of the dynamic development of the global financial sector, the roles of cryptocurrency and Central Bank Digital Currency (CBDC) have increasingly garnered attention.

In the midst of the dynamic development of the global financial sector, the roles of cryptocurrency and Central Bank Digital Currency (CBDC) have increasingly garnered attention from policymakers, investors, and economic analysts. A survey conducted by the Bank for International Settlements (BIS) in January 2023 revealed that about 86% of central banks participating in the survey have been exploring research related to CBDCs, with more than half, or 60%, having started practical experiments using this technology. On the other hand, the latest data from CoinMarketCap on March 9, 2024, shows the existence of as many as 8,955 types of cryptocurrencies with a total market capitalization reaching USD 2.61 trillion.

The emergence of CBDCs in some countries has raised critical questions about how the interaction and role of cryptocurrencies will change and adapt in this continuously evolving financial landscape. This article will delve deeper into the potential scenarios between cryptocurrencies and CBDCs and the factors that will influence their relationship in the new era of digital finance.

Scenario 1: Coexistence and Different Use Cases

The potential coexistence between CBDC and cryptocurrency promises a more inclusive and innovative financial ecosystem. CBDCs, driven and guaranteed by a country’s monetary authority, offer the much-needed assurance of stability and security in daily financial transactions such as retail payments, fund transfers, and tax payments. The presence of CBDCs can facilitate access to financial services for citizens previously unreachable by the conventional banking system, while also speeding up transaction processes with lower costs.

On the other hand, cryptocurrencies offer a arena for financial innovation by enabling the development and use of decentralized applications (dApps) that offer solutions to various problems, from automated smart contracts to peer-to-peer lending platforms. Cryptocurrencies like Bitcoin and Ethereum have proven themselves not only as attractive investment assets but also as tools for trading value in a fast and transparent way across borders without the need for traditional intermediaries.

Interoperability between CBDCs and cryptocurrencies is a key factor in achieving harmonious coexistence. For example, the development of CBDCs capable of interacting with public blockchains can enable seamless value transfers between the two ecosystems, paving the way for new financial innovations while maintaining the stability and trust offered by central bank digital currencies. Initiatives like creating gateways or bridges that connect CBDCs with cryptocurrencies could facilitate efficient digital asset exchanges.

However, for this coexistence scenario to materialize, a supportive regulatory framework is needed. Regulation must be designed to encourage innovation while maintaining the stability of the financial system and protecting user rights. An open and adaptive regulatory approach will allow developers and entrepreneurs to experiment and innovate, while financial authorities ensure risks are identified and managed appropriately. Practical applications could include cross-asset trading platforms that integrate CBDCs and cryptocurrencies, enabling users to transact between different types of digital assets with high security and speed.

Scenario 2: Competition for Adoption

In the competition between CBDC and cryptocurrency, both digital asset forms offer different advantages to attract user interest. CBDCs, with backing from central banks, promise higher security and stability as well as seamless integration with the traditional financial system, making them ideal for daily transactions and access to financial services. On the other hand, cryptocurrencies offer privacy and freedom from government or financial institution control, making them an attractive option for those seeking alternatives to the traditional financial system or investing in assets with potential value appreciation.

User perceptions of security, usability, and privacy play a key role in choosing between CBDCs and cryptocurrencies. Users may choose CBDCs for security and stability in daily transactions, while cryptocurrencies might be more appealing to those who value privacy or wish to invest long-term. The effectiveness of CBDC integration with the traditional financial system will also significantly affect user choice, where a CBDC that is easy to use and well-integrated can increase its adoption.

Ultimately, the dynamics of competition between CBDCs and cryptocurrencies will be determined by how well both digital assets adapt to user needs and preferences. Central banks and policymakers must design CBDCs that are not only secure and stable but also accessible and user-friendly, while the cryptocurrency community must continue to innovate to improve security and usability aspects. The outcome of this competition will depict a future digital financial landscape that is more inclusive and diversified.

Scenario 3: Interoperability and Bridges

The integration of CBDC and cryptocurrency through a hybrid system offers a transformative vision for the digital financial world, leveraging the strengths of both to create more comprehensive solutions. With CBDCs providing a stable and secure transaction foundation—thanks to direct management by central banks—the financial system can enjoy the reliability necessary for daily operations and retail payments. Unlike the independent coexistence scenario described earlier, this hybrid system emphasizes direct integration between CBDCs and the innovations offered by cryptocurrency, such as smart contracts and dApps, facilitating the development of financial services that are not only innovative but also seamlessly integrated.

Realizing a hybrid system requires synergy among regulators, policymakers, and developers in establishing effective interoperability standards, allowing smooth value flow between the two worlds: CBDCs and cryptocurrencies. This scenario differs from the coexistence scenario outlined in Scenario 1, where technical and operational integration between CBDCs and crypto assets forms the primary basis, rather than just a parallelism of functions. This collaboration is essential not only for facilitating transactions between systems but also vital for ensuring security and efficiency in value exchange, driving wider acceptance of this new financial technology.

Intelligent and flexible regulatory arrangements are key to accommodating growth and innovation in this hybrid system, marking a significant departure from traditional coexistence approaches. Adaptive regulation must be designed to support this ecosystem, reinforcing user trust and ensuring that the integration of CBDCs and cryptocurrencies not only meets current market needs but also remains flexible to future changes and challenges. With a framework that blends legal certainty with room for technological exploration, the hybrid system between CBDCs and cryptocurrencies has the potential to steer the future of finance towards a more innovative, secure, and inclusive direction, making integration and synergy between the two a distinguishing feature from previous coexistence scenarios.

Scenario 4: Crypto as a Store of Value

With increasing regulation on stablecoins and the implementation of CBDC, cryptocurrencies are increasingly viewed as an attractive alternative for value storage. Similar to gold, which has long been valued as a hedge against inflation and economic instability due to its scarcity and recognized intrinsic value over thousands of years, cryptocurrencies like Bitcoin are referred to as “digital gold.” This is because Bitcoin has a limited supply and the ability to operate outside the traditional financial system, offering protection against inflation and fiat currency devaluation.

Besides Bitcoin, other assets like silver, land, and artworks also serve as stores of value due to their resilience against inflation and their ability to maintain value over time. However, the advantage of cryptocurrencies over physical assets lies in the ease of transfer, more flexible unit division, and broader potential use through blockchain technology, making them a modern choice for investment portfolio diversification.

The main challenge for cryptocurrencies in solidifying their position as a store of value lies in the high market volatility and varied public perception. However, with increased education, supportive regulation, and the development of secure infrastructure, cryptocurrencies have the potential to become an integral part of investment portfolios, providing an innovative and flexible alternative for value storage alongside traditional assets like gold.


According to my analysis, the first scenario—coexistence between CBDC and cryptocurrency—is the most likely to occur in the future. The primary reason is that both systems serve different needs and purposes, thus having the potential to complement each other within the global financial ecosystem. CBDCs, with official support from governments, provide the essential stability and security for daily transactions and tax payments. Meanwhile, cryptocurrencies, with their characteristic decentralization, encourage innovation through dApps and smart contracts and offer investment opportunities with significant profit potential.

Another factor supporting this coexistence scenario is the increasing trend of government and regulatory support for blockchain and cryptocurrency innovations, alongside the development of their CBDCs. A balanced and innovation-open regulatory approach facilitates an environment where CBDCs and cryptocurrencies can grow together. Additionally, efforts to design CBDCs that are interoperable with external blockchains and the traditional financial system indicate an awareness of the need for integration and collaboration between systems.

Increasing user adoption and acceptance of digital finance also play a critical role. With varying preferences between security, privacy, and profit potential, people are likely to choose the financial solution that best suits their needs. Moreover, the need for efficient and affordable cross-border transactions in an interconnected global economy makes both systems, CBDCs, and cryptocurrencies, increasingly relevant. Therefore, the coexistence between CBDCs and cryptocurrencies is not only possible but also necessary for creating a more inclusive, diversified, and innovative financial ecosystem in the future.

Tuhu Nugraha
Tuhu Nugraha
Digital Business & Metaverse Expert Principal of Indonesia Applied Economy & Regulatory Network (IADERN)