Bitcoin vs CBDC: What's the difference?

Bitcoin vs CBDC: What’s the difference?


In recent months, there has been more and more talk about the possibility of central banks issuing their own digital currencies (CBDC): in particular, that any citizen can directly hold a current account with the central bank (as private banks and governments do today). And yet, he can hold it indirectly, through a private financial institution (thanks to a new banking obligation that will be 100% secured by the obligations of the central bank), or that there will be a mixed formula between these two formats.

As a digital monetary asset, many people equate CBDC with Bitcoin (or other cryptocurrencies), as if central banks are going to issue a kind of “public Bitcoin”. But nothing can be as far from the truth as this.

According to, the only thing Bitcoin and the various CBDC offerings have in common is that they are both monetary and digital assets. In all other respects, they are radically different.

Firstly, assets that are intended to be used as an indirect medium of exchange are monetary assets. And therefore, monetary assets, like all assets, can be divided into real or financial assets. Financial assets are assets that are themselves liabilities of another economic agent, while real assets are not anyone’s liabilities.

Bitcoin is a real asset because it does not represent any financial obligation for anyone (no one is obligated to give or do anything in exchange for Bitcoin), while CBDCs are obligations of central banks and, more generally, the state. This distinction is crucial because the value of financial assets is entirely related to the debtor’s ability to meet its obligations: if it fully or partially renounces its obligations, the financial asset is depreciated. Consequently, if it wanted to, the state could completely destroy the value of the CBDC, but it could not do the same with Bitcoin (neither the state nor any other agent).

Secondly, real assets can be divided into tangible and intangible (or digital). Tangible assets are assets whose functionality is related to their material structure: if the material structure changes, then the functions that they can perform also change. Intangible assets are those whose functionality does not depend on the material containing them. Gold, for example, was a real and tangible monetary asset (a gold coin is not the same as a brass coin).

On the other hand, Bitcoin is a real and immaterial (or virtual) monetary asset, since it is not the carrier that is important for the BTC, which contains information that makes its owner a socially recognized owner of a certain number of monetary units, but the information itself.

All financial assets, by the way, are intangible assets (hence the possible confusion between Bitcoin and CBDC).

Third, monetary assets can also be divided into centrally issued/monopoly and decentralized/competitive monetary assets. By definition, CBDCs are centrally issued monetary assets, since only the central bank can create them (which can be a disadvantage in terms of both excess and insufficient supply).

In contrast, the creation of Bitcoin is decentralized, since anyone can become a miner by trying to verify transactions in the bitcoin community and, accordingly, receiving a reward in the form of newly created coins. However, such a competitive creation is not free, since it is limited by the rules of the Bitcoin protocol, which limits the possibilities for flooding the market with new supply, as well as for adapting supply to growing demand while maintaining the stability of its value. CBDC transactions give the central bank enormous powers to authorize or ban them (or change their terms).

And, fourth, monetary assets can also be divided into centralized transfer and decentralized transfer monetary assets. In the first case, all transactions pass through one central node (or a very small set of oligopolistic central nodes), either for their simple processing, or even for their authorization. The degree of centralization of transfers is important because the existence of monopolistic or oligopolistic central nodes gives these nodes the power to block unwanted transactions between subordinate nodes, that is, establishes vertical (or asymmetric) relationships between different network nodes (central and non-central).

CBDCs are centralized transfer assets, since each transaction must be confirmed by a central bank or some private bank authorized by the central bank. In contrast, fiat money, although it is a centrally issued monetary asset, is a decentralized transfer asset, since we can endorse them from hand to hand without the knowledge and consent of the central bank.

Similarly, BTC is a decentralized transfer monetary asset, since any Bitcoin owner can transfer monetary units to any other person, and, in turn, any person can eventually confirm this transaction by converting it into a consensual historical record.

In short, Bitcoin is a real, digital, decentralized, and decentralized monetary asset. The closest monetary asset to Bitcoin is gold, which can be described as a real, tangible, decentralized issued, decentralized transmitted, issued monetary asset.

CBDCs have nothing to do with Bitcoin, as they are financial (and therefore intangible), centrally issued and centrally transferred monetary assets. Rather, CBDCs resemble a cash fiat currency, which is a financial (and therefore intangible), centrally issued, and decentralized monetary asset.

In this sense, the alleged “revolution” of CBDC compared to cash, consists only in changing the terms of their transfer (since both, I repeat, are obligations of the central bank): stop conducting peer-to-peer transactions through the obligations of the central bank, and start sending them through the central node, which, in exchange for a significant reduction in operating costs for these transactions, will have enormous power to authorize or prohibit them (or arbitrarily change their terms).

In fact, CBDCs represent the very essence of what Bitcoin was born against.