Central Bank Digital Currencies in the Global Economy: Lessons from China's Digital Yuan for the Development of the European Central Bank's Digital Euro

The primary objective of this article is to provide a comprehensive examination of the Central Bank Digital Currency (CBDC), its potential benefits and the risks it might pose to traditional banking systems. To fulfil this objective, the article offers a holistic analysis of Central Bank Digital Currency (CBDC), examining risks inherent in traditional banking and the merits of CBDC adoption. It delves into the motivation behind increasing CBDC adoption by central banks and outlines various experimental programs. It mainly explores the digitalization of the Euro and the transformative potential of CBDCs on aspects like financial inclusion and monetary policy. Included within is an exploration of the wholesale CBDC with Bank of France followed by a practical example of the digital yuan within the Chinese economy. The research methodology encompasses a rigorous literature review, analysis of the research context, and retrieval of pertinent studies. The results and discussions section reveal critical findings and potential global financial impacts of CBDC. The article concludes with prospects and challenges of CBDC implementation, underlining its importance in financial systems’ evolution.