The next phase of digital money will not be defined simply by whether cryptocurrencies survive. It will be defined by who controls the infrastructure on which digital money moves.
In 2021, that contest was already becoming visible. Central banks were moving beyond abstract discussions of distributed ledgers and digital currencies and into research, pilots and contingency planning. The significance was larger than a new payment instrument. It pointed towards a reordering of the digital-currency landscape.
My argument was that the decade ahead would increasingly be shaped by three forces: consolidation, centralisation and control. The previous fintech decade had been characterised by change, complexity and competition. The next one, I argued, would be about institutions absorbing many of those innovations into regulated financial infrastructure.
The important question was no longer whether digital money would become mainstream. It was who would define its architecture, rules and access.
From experimentation to infrastructure
Distributed Ledger Technology, or DLT, is a method of maintaining a shared record across multiple participants rather than relying on a single centrally managed database. Blockchain is one implementation of that broader idea. The distinction matters because a distributed ledger does not have to reproduce the permissionless model associated with Bitcoin.
A permissionless network allows broad participation without a central authority deciding who may join. A permissioned network restricts participation and can assign different rights to different institutions. That second model is particularly relevant to regulated financial markets, where identity, access, settlement finality and accountability cannot simply be ignored.
This is why the institutional adoption of DLT was always likely to look very different from the early cryptocurrency ideal. The technology could be distributed while governance remained highly structured.
CBDCs change the nature of the debate
A central bank digital currency is digital money issued by a central bank. That makes it fundamentally different from Bitcoin. Bitcoin was designed around a permissionless network and a predetermined supply mechanism. A CBDC would remain part of the monetary system overseen by public institutions, with issuance and monetary policy still determined by the central bank.
By 2020, central-bank interest was no longer marginal. Policymakers were openly discussing both wholesale CBDCs — designed principally for settlement between financial institutions — and general-purpose or retail forms that could ultimately be available to the public.
The distinction is important. Wholesale applications can improve the plumbing of finance without dramatically changing the relationship between citizens, commercial banks and the central bank. A broadly available retail CBDC raises much larger questions about distribution, privacy, identity, bank deposits and the role of intermediaries.
The three Cs: consolidation, centralisation, control
Consolidation. As central banks and regulated institutions invest in digital-currency infrastructure, the fragmented landscape of private experiments is likely to face pressure to converge around standards that can operate at institutional scale.
Centralisation. DLT does not necessarily mean decentralised governance. Permissioned networks can distribute the ledger while centralising the authority to determine participation, standards and monetary rules.
Control. Once digital money becomes part of regulated public infrastructure, questions of identity, compliance and access move to the centre of the system. The architecture becomes inseparable from policy.
That was the central tension I saw in the emerging CBDC era: technologies associated with decentralisation could ultimately become building blocks for a much more institutionally governed form of digital money.
Why central banks were interested
The potential applications went well beyond replacing notes and coins with a digital equivalent. DLT and central-bank digital money were being examined for interbank settlement, securities settlement, payment-system resilience, bond issuance, information exchange, trade finance and other parts of financial-market infrastructure.
For emerging economies, the case could include financial inclusion and reducing dependence on cash. For advanced economies, another concern was preserving the connection between public money and citizens as physical cash use declined and private payment systems became more important.
The Bank of Canada captured the institutional logic particularly clearly at the time: even without an immediate decision to launch a CBDC, building the capacity to do so would take years. Waiting until the need became obvious would therefore be too late. Similar preparatory work was visible across central banks and through international coordination.
Digital identity becomes unavoidable
A general-purpose CBDC also brings a difficult issue into view: identity. A permissioned digital-money system designed for regulated, potentially cross-border use cannot treat identification, anti-money-laundering controls and access rules as peripheral concerns.
That creates a very different proposition from the early cryptocurrency narrative. The debate moves from whether money can move digitally without a trusted intermediary to how a digital monetary system should identify participants, protect privacy, enforce rules and remain interoperable across borders.
Those questions are not merely technical. They determine how much power sits with central banks, commercial banks, payment providers, governments and ultimately the individual.
What this could mean for Bitcoin
I did not see the rise of CBDCs as implying the disappearance of Bitcoin. Its role as a scarce digital asset could remain distinct from its usefulness as an everyday payment mechanism. But the competitive environment around payments could change substantially if central banks succeeded in creating regulated digital currencies with institutional backing and broad interoperability.
Regulation would be decisive. Anti-money-laundering and counter-terrorist-financing requirements were already providing governments with a framework through which cryptocurrency activity could be brought more firmly into regulated finance. CBDCs could accelerate that process by giving public institutions their own digital alternative.
The real contest is over the architecture of money
The first cryptocurrency era encouraged us to think about digital money primarily as a challenge to established institutions. CBDCs suggested another possibility: established institutions could adopt parts of the underlying technology and use them to redesign the monetary system themselves.
That is why the emergence of DLT and CBDCs looked to me like more than another fintech cycle. It represented a contest over the architecture of money — who issues it, who can access the network, how transactions are governed and where control ultimately resides.
The technology may be distributed. The power around it does not necessarily have to be.
Historical note. This essay was originally published on 7 January 2021. It reflects the state of the CBDC and distributed-ledger debate, and my assessment of it, at that time.