A Panoramic Perspective on Central Bank Digital Currency (CBDC): Technical Solutions, Regulatory Policies and Prospects for Cross-border Payments

In recent years, the global central bank digital currency pilot has been in full swing. In June 2025, the European Central Bank (ECB) issued a tender document for the second phase of the digital euro technical solution, clarifying the technical standards for the basic ledger architecture and privacy protection mechanism. The Central Bank of China (BoE) also launched a digital pound proof-of-concept (PoC) project called "Project Aurora" in the same month, focusing on testing the efficiency of cross-border payments in retail and wholesale scenarios. At the same time, the People's Bank of China (PBoC) completed the full-link test of the offline payment function of the digital RMB at the end of 2024, and expanded its application to some retail merchants in the Guangdong-Hong Kong-Macao Greater Bay Area in the first half of 2025. The actions of the three major economies in the field of CBDC indicate that the global digital currency landscape is being restructured.

In Europe, the digital euro trial is divided into two phases: technical feasibility study and practical application test. The first phase focuses on the hybrid architecture of distributed ledgers and centralized databases to balance transaction traceability and privacy protection; the second phase focuses on cross-border payments and legal currency equal swap mechanisms. ECB officials said that the digital euro will seamlessly connect with the existing bank settlement system, ensure the stability of the banking system, and provide low-cost payment options for individuals and small and medium-sized enterprises.

In the UK, "Project Aurora" is jointly carried out by the BoE and financial market participants of the Bank of England, covering wholesale business scenarios such as foreign exchange transactions and cross-border trade settlements, and will test the micropayment and offline transfer functions of the digital pound at the retail level. The chief economist of the BoE pointed out that the introduction of the digital pound will help reduce cross-border transaction costs and enhance the international competitiveness of the UK financial market. In addition, the BoE is working with financial technology companies to explore the automatic execution and settlement scheme of smart contracts based on DLT (distributed ledger technology) to further improve transaction transparency and efficiency.

China's digital RMB (e-CNY) project started the earliest and has now entered the large-scale pilot stage. In the first quarter of 2025, the central bank promoted digital RMB wallets in hundreds of merchants in cities such as Shenzhen and Suzhou, covering daily life scenarios such as catering, retail, and public transportation. PBoC data shows that as of May 2025, the cumulative transaction volume of digital RMB has exceeded 50 billion yuan, with an average of more than 8 million active users per day. In the next step, the central bank will focus on testing cross-border payment and cross-border clearing functions, and plans to carry out joint pilots in some countries along the Belt and Road in the second half of this year.

From a technical perspective, central banks of various countries have differences in the underlying CBDC platform. ECB and BoE prefer a hybrid solution based on permissioned blockchain and traditional financial architecture to meet the dual requirements of system stability and regulatory controllability; while PBoC conducted in-depth comparative tests between the UTXO (unspent transaction output) model and the account model, and finally adopted an account model that takes into account both performance and scalability, and developed a "double signature" mechanism for offline payment security to prevent the risk of double payment in offline scenarios.

In terms of policy supervision, the EU launched the "Digital Finance Package" in April this year, which explicitly included the digital euro in the EU payment system regulatory framework and required service providers to implement anti-money laundering (AML) and know your customer (KYC) obligations for digital currency transactions. The UK Financial Conduct Authority (FCA) also issued sandbox regulatory guidelines for CBDC-related financial technology companies in the same month, providing a more flexible pilot environment for innovative companies. China emphasized data security and personal privacy protection in the supporting regulations for digital currency pilots jointly issued by the "two highs and one ministry" (Supreme People's Court, Supreme People's Procuratorate, and State Administration for Market Regulation), requiring third-party institutions to pass national-level security assessments before participating in the construction of the digital RMB ecosystem.

In terms of market impact, the large-scale promotion of CBDC may change the liability structure of commercial banks. Some research institutions predict that if digital currency replaces some bank deposits, the bank's funding costs may rise, but at the same time it can also increase the profit margin of payment business. In addition, the improvement of cross-border payment efficiency will help small and medium-sized enterprises reduce exchange costs and enhance their bargaining power in international trade. For consumers, CBDC means a more convenient and low-cost cross-border shopping experience and more diversified payment options.

In the field of financial technology, the promotion of CBDC has spawned new technology applications such as smart contracts, distributed identity authentication (DID), and multi-party secure computing (MPC). Many payment service providers have stated that they will launch a series of innovative products based on CBDC, such as programmable payments based on smart contracts, digital asset custody, and cross-border asset management platforms. At the same time, cloud service providers and blockchain technology companies are also actively deploying to provide one-stop CBDC solutions, including underlying platforms, API interfaces, and security protection services.

As for investors, the attention paid to CBDC and its derivative fields continues to rise. In their latest reports, several investment banks pointed out that the market segments such as infrastructure construction, technical services and compliance consulting in the CBDC ecosystem will form a market size of hundreds of billions of US dollars in the next five years. Private equity funds with higher risk appetite have also begun to pay attention to early blockchain payment platforms and digital wallet developers, hoping to obtain high returns driven by both policies and technology.

However, the promotion of CBDC is not smooth sailing. Some experts are concerned that there is a natural contradiction between the efficient settlement of digital currency and privacy issues. How to find a balance between transparent supervision and the protection of personal privacy is a major issue facing central banks of various countries. In addition, how to prevent the digital currency system from being attacked by cyber attacks and abuse of functions also requires the establishment of a complete emergency response and multi-level security protection mechanism.

Overall, the central bank's digital currency has entered the pilot verification stage from the theoretical research stage, and will usher in more application scenarios in the next few years. The three major economies of Europe, the United Kingdom and China have their own focuses in terms of technical routes, regulatory policies and market promotion, but they all aim to promote the modernization of the payment system and enhance financial inclusion and international competitiveness through CBDC. For financial institutions and technology companies, in-depth participation in the construction of the CBDC ecosystem will bring unprecedented development opportunities; at the same time, they also need to plan ahead and actively respond to technical, regulatory and market risks to safeguard financial innovation in the digital currency era.