Political motives behind global adoption of Central Bank Digital Currency revealed in new study

A CBDC is a digital form of government-issued money, backed and regulated by a nation's central bank.

The research, led by triple crown accredited Nottingham Business School (NBS), part of Nottingham Trent University, analysed 68 countries and revealed that more authoritarian governments are leading the charge on CBDCs due to centralised power structures which allow these governments to quickly implement tightly controlled systems - often leveraging digital currencies to enhance surveillance and control capital flows.

In contrast, countries with more democratic institutions and political systems are proceeding with more caution, taking time to address concerns around privacy, transparency, and trust before moving forward.

The study also explored the relationship between corruption and CBDC adoption and found that countries with higher levels of perceived corruption are more likely to explore digital currencies.

Dr Milad Armani Dehghani, who led the research with Professor Alex Brauneis from Nottingham Business School, said: “At first, that might seem backwards. But when you think about it, it starts to make sense. Digital currencies give governments powerful tools to fight things like money laundering, tax evasion, and illegal money flows, especially in places where traditional banking systems aren’t exactly known for being transparent.

“Take China’s e-CNY, for example. It’s built on encrypted tech that lets the government track spending and stop things like counterfeit currency. Russia’s digital Ruble takes a different approach - it outright bans private cryptocurrencies, citing fears about terrorism and illegal arms funding. In these cases, CBDCs aren’t just about innovation. They’re about control, stability, and bringing some order to messy financial systems, though whether that’s a good thing or a little too much oversight really depends on how you look at it.”

The rise of stablecoins - privately issued digital currencies like USDT and USDC - has also played a role in shaping national strategies. Although these currencies are not the direct cause of CBDC development, their rapid growth has increased the urgency for governments to respond. Stablecoins are fast, efficient, and borderless, making them attractive but also threatening to traditional financial systems and national monetary sovereignty.

The research also found that a country’s level of development, measured by factors such as income, education, and life expectancy, has little bearing on whether it pursues a CBDC. Both advanced and developing economies are actively exploring digital currencies, but for different reasons. While wealthier nations focus on innovation and competing with Big Tech, developing countries are drawn to the potential of CBDCs to increase financial inclusion and reduce corruption.

Professor Alex Brauneis, co-author and Professor of Finance and Innovation at the Centre for Finance, Technology and Society at NBS, said: “This research helps policymakers and innovators alike understand the broader implications of digital currency. Whether you’re building the technology or shaping the regulations, the question isn’t just can they do this, but why are they doing it?

“For developers of digital wallets and crypto platforms, understanding the regulatory landscape in each country is crucial, particularly how political systems influence the pace and direction of innovation. Governments are encouraged to critically evaluate whether their CBDC strategies support goals like economic freedom and transparency, or whether they risk concentrating power and oversight.

NBS collaborates with universities and commercial partners globally to deliver leading research and innovative solutions that positively impact communities worldwide. Through its Centre for Finance, Technology, and Society, as well as its Accounting and Finance Research Group, the school’s research expertise in financial technologies and their implications for payments, financial systems, and consumer behaviour, positions it at the forefront of this rapidly evolving domain.

Through a new partnership with the Digital Pound Foundation, NBS will explore consumer adoption of CBDCs in the UK, focusing on trust, value, usability, and broader impacts. The collaboration will also address the evolving digital payments landscape and engage in roundtables and policy outreach on CBDC use cases.

Professor Brauneis recently delivered an inaugural lecture to students, colleagues and guests at NTU, highlighting why blockchains, cryptocurrencies, and their applications are too important to ignore. Alex guided the audience through the fundamentals of cryptocurrencies and blockchains, explained the concept of decentralized finance (DeFi), compared it with traditional financial systems, and offered insights into the future of DeFi.

Listen to Professor Brauneis explore the world of cryptocurrency on the NTU podcast, A beginner’s guide to cryptocurrency: what is it and how does it work?