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Central bank digital currencies: Accelerating a digital economy with advanced technology

Since the first coins were minted by the Lydians to pay their armies in the seventh century B.C.E., the nature of money has continuously evolved.1 From coins to paper and plastic, to swipes of a smartphone today, the forms of money and the methods of exchanging it have paralleled technological advances. Cash is no longer king. In fact, most of the money in circulation today is in digital form, and for obvious reasons. Consumers, businesses, and financial institutions increasingly value the ease, flexibility, and convenience that come with digital payments. 

To keep abreast of the opportunities surrounding these changes, many central banks are actively experimenting with the idea of issuing digital versions of national currency, in the form of central bank digital currencies (CBDCs). This promising new form of digital money is made possible by advanced technology, which Microsoft is helping to enable through our global technology partner network. It is part of our commitment to Microsoft Cloud for Financial Services, which helps banks and other businesses unlock business value and deepen customer relationships. 

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How CBDCs are unique among digital currencies 

The growing preference for digitized money and payments has generated waves of innovation across governments, banks, and the global financial system. Cryptocurrencies like Bitcoin have demonstrated the potential value of new forms of digital currency. But because cryptocurrencies are unregulated, they remain too volatile to be widely trusted and broadly accepted as legal tender. 

By contrast, CBDCs are digital assets issued backed by a nation’s monetary authority, or central bank. A CBDC is a digital form of fiat money (or government-decreed currency) which shares the essential properties of a nation’s cash: the same denominations, values, liquidity, and stability; the same financial liability to the central bank; and the same applicability for any type of payment—extending the functionality of the country’s currency. CBDCs remain interoperable with existing financial structures and are reliably overseen by the central bank. 

Initially intended for use in wholesale banking with the prospect of extending to the retail banking system, CBDCs offer compelling benefits as compared to cash and current digital financial tools. These benefits include: 

  • Streamlined cross-border payments enabled by reduced reliance on intermediaries, with benefits in lower transaction costs and improved transparency in international transactions. 
  • Integrated smart contracts (basically, self-executing contracts with terms of an agreement written into code), which can automate and enforce terms. These provide a high level of efficiency and precision and offer composability (the ability to create and combine modular services and products across complex systems). 
  • Liquidity and settlement finality. CBDC assets can be readily converted into other forms of money or assets, which facilitates a seamless flow and instantaneous settlement without delay or risk of reversal. 
  • More accessible government-to-person payments, such as tax refunds or stimulus funds, with direct deposits into digital wallets that don’t require bank accounts. 
  • New formats for payments and transfers, which are enabled through efficient processes that are usually not feasible with traditional payment systems (for example, by means of crypto wallets.)
  • Financial inclusion through easier access to financial services, particularly for unbanked populations in developing countries, such as through offline payments. 

For these and other reasons, CBDCs hold enormous market potential. The annual value of transactions involving CBDCs is projected to reach USD213 billion by 2030, a remarkable growth rate of over 260,000% in just seven years.2  

The Drex project: How Microsoft is working with the Brazilian Central Bank 

In their earliest iterations, CBDCs are being introduced into national and regional economies in limited circulation, offered alongside cash as an equivalent monetary option, with the possibility of becoming more broadly circulated as they become more popular and accepted. Currently, more than 130 countries are exploring or developing CBDC initiatives, with varying degrees of maturity. Progress in the United States is nascent, while China has the world’s largest pilot in the world, with 260 million digital wallets.3  

Brazil is one of the earliest nations to pilot CBDC as it moves to build a more modern digital economy. Microsoft and our partners are working with Banco Central do Brasil (BCB) and commercial banks to help develop a solution for its CBDC, known as Drex.4 It will be one of the most advanced CBDC initiatives in the world. 

Drex is designed to help advance and democratize the nation’s economy by broadening access to intelligent financial services with greater ease and lower costs. A key feature is tokenization—creating digital representations of financial assets—which opens the door to many new options for trading and transactions. Tokens are managed on a distributed ledger technology (DLT) to ensure a secure, shared, and decentralized environment for transactions. This can make financial services more programmable, standardized, and secure, while ensuring optimal privacy.  

Drex could also be integrated into Brazil’s fast payment system, called PIX, which allows for quick and efficient transactions, and even with the global payments network SWIFT. Longer term, it also aligns with the innovative Finternet framework and Unified Ledger concept proposed by the Bank for International Settlements (BIS) to transform the global financial system. 

Empowering economies with CBDC initiatives worldwide 

The Drex project is a long-term effort that entered the second phase of its development in June 2024, which will continue for another 14 months with extensive privacy testing and new use cases. Ensuring the privacy and security of CBDC transactions is critical, so Microsoft and our partners, BCB, commercial banks,5 and other interested parties are working together to meet emerging requirements and ensure appropriate safeguards. 

Elsewhere, Microsoft is engaged in early CBDC initiatives in nations around the world. For example, we’re members of the Ensemble Project proposed by the Hong Kong Monetary Authority (HKMA), which aims to develop a set of industry standards to support interoperability among wholesale CBDCs, tokenized money, and tokenized assets.6 

Microsoft is uniquely positioned to empower a CBDC project like Drex in several critical ways: 

  • Infrastructure support: The Microsoft Azure platform provides robust infrastructure, AI services, and enterprise security—combined with our deep expertise with blockchain and other technologies critical for the design and implementation of a secure, scalable, and interoperable CBDC platform. 
  • Privacy and security: Azure provides a broad catalog of security services that can be used as perimeters protecting CBDCs, with innovations such as a Zero-Knowledge Proof (ZKP) solution (called ZKP Nova) to help ensure privacy for digital assets. Additionally, Microsoft Azure Managed Confidential Consortium Framework (CCF) provides features to assure customers that data is inaccessible to unauthorized third parties including cloud service providers.  
  • AI innovation: Generative AI copilots, for example, can help create smart contracts, analyze document inputs, write code, and identify vulnerabilities and risks. 
  • Global reach and availability: Azure has a global network of datacenters, which enables central banks to deploy CBDC solutions in proximity to their users—reducing latency and ensuring high availability.  
  • Robust partner ecosystem: Innovation in CBDC solutions is spearheaded by Microsoft’s vibrant global network of partners and developers, who can provide central banks with access to expertise, best practices, and pre-built solutions, such as a CBDC sandbox. 

Explore the possibilities of CBDC with Microsoft 

Microsoft is excited to share our insights and expertise on CBDCs with nations and commercial banks across the global financial ecosystem. For more details on Microsoft’s work on the Drex project and our participation in FEBRABAN TECH 2024 in São Paulo, Brazil, see our press release.

Learn more about Microsoft Cloud for Financial Services.

1When – and why – did people first start using money? The Conversation.

2Jupiter Research, CBDC Transactions to Exceed $213bn by 2030, as Pilots Accelerate Rapidly, August 2023.

3 The Central Bank Digital Currency Tracker, The Atlantic Council.

4See Drex – Digital Brazilian Real ( and Piloto Drex (


6Hong Kong Monetary Authority – HKMA establishes the Project Ensemble Architecture Community.