CBDCs and Programmable Money — Research Reference

A CBDC is a digital national currency that is a direct liability of a country's central bank. The critical distinction from existing digital money: programmability. CBDCs can be hard-coded with rules that govern how, when, and on what the money can be spent.

2026-03-15 9 min read Research file
Contents

The Core Concept

A CBDC is a digital national currency that is a direct liability of a country’s central bank. The critical distinction from existing digital money: programmability. CBDCs can be hard-coded with rules governing their use — expiration dates, purchase restrictions, geographic limits, conditional release.

The Fed’s own definition of programmable money: “a unified, coherent product that encapsulates both the storage of digital value and programmability of that value.” (Federal Reserve, FEDS Notes, “What is programmable money?”, 23 June 2021)

The screen moves into the rail. The BIS’s Project Agorá (seven central banks, launched April 2024) published its final report on 27 May 2026: “Each institution implements anti-money laundering (AML) / countering the financing of terrorism (CFT) / anti-fraud controls and sanctions screening independently and confidentially, while the platform ensures that all required validations are completed prior to settlement.” Its design requirement: “The prototype must support coordination of AML/CFT, fraud, sanctions and balance checks before settlement occurs.” (BIS Innovation Hub, “Project Agorá: A shared programmable platform for wholesale cross-border payments”)

The Quiet Parts Said Out Loud

Agustin Carstens, General Manager of the BIS: “A key difference with a CBDC is that the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.” (IMF cross-border-payments seminar panel, October 19, 2020.)

Bo Li, IMF Deputy Managing Director (October 2022): “By programming CBDC, those money can be precisely targeted for what kind of people can own and what kind of use this money can be utilized.”

Eswar Prasad, Cornell economist (at WEF Summer Davos): “You can have programmability — units of central bank currency with expiry dates” and governments could decide “units of central bank money can be used to purchase some things, but not other things that it deems less desirable like say ammunition, or drugs, or pornography.” (Prasad was speaking as an academic, describing a scenario he called “extremely dangerous to central banks” — not endorsing it; the AP fact-checked the viral clips that stripped his warning.) AP’s transcript of the full session: “If you think about the benefits of digital money, there are huge potential gains. It’s not just about digital forms of physical currency, you can have programmability units of central bank currency with expiry dates” — the expiry dates sit on his list of gains — and, of the purchase-restriction power, “that is very powerful in terms of the use of a CBDC and I think also extremely dangerous for central banks.” To AP: “I was speaking for myself (as an academic) and not for the WEF or any other organization/institution”; the WEF told AP he is not employed or paid by it.

China’s Digital Yuan (e-CNY)

Scale (late 2025): 3.48 billion cumulative transactions worth 16.7 trillion yuan (~$2.37 trillion USD). Growth of 800%+ since 2023. World’s largest live CBDC experiment.

January 1, 2026 upgrade: PBOC moved e-CNY from cash-like instrument to digital deposit money. Commercial banks pay interest on holdings. Deposit insurance protection. Incorporated into reserve requirement framework.

Documented programmability: Under China’s 15th Five-Year Plan (2026-2030), e-CNY became the world’s first large-scale programmable currency. Smart contracts ensure agricultural subsidies spent only on approved categories (seeds, fertilizers). Programmable logic reduced misuse of rural social program funds by ~22% (Trend.az: “Early January 2026 metrics suggest this programmable logic has already reduced administrative leakage and misappropriation in rural social programs by an estimated 22%,” Trend.az). PBOC tested limited-term stimulus: 50 billion e-CNY to low-income households with 30-day usage condition; 94% spent within the first week (Trend.az). Smart contracts have been piloted to ring-fence fiscal subsidies, loans, and R&D funds so the money can be spent only on approved categories, including agricultural support routed directly to farmers (gov.cn; Global Times). And the money can be built to expire: China’s stimulus pilots have distributed e-CNY that lapses if it is not spent inside a set window, the programmable equivalent of cash with a shelf life.

Surveillance: CNAS report (Fanusie & Jin, Jan 2021): “DCEP technical architecture will allow for real-time or near-real-time financial surveillance of all users’ transactions, something currently not feasible by any country in today’s global banking system.”

No widely documented cases of e-CNY wallets being frozen for dissidents yet, but China has a track record of freezing traditional bank accounts of dissidents (e.g., Deng Yuwen’s 300,000 yuan frozen as a “warning to dissidents”).

The U.S. — Dead in the Water

Executive Order 14178 (January 2025): Blanket prohibition on federal CBDC activity.

Fed Chair Powell: “We’re not doing any work that is designed to lead to a retail CBDC. That’s not happening.”

Legislative wall:

  • July 2025: House passed Anti-CBDC Surveillance State Act (H.R. 1919), 219-210
  • March 2026: Senate voted 89-10 to ban CBDC issuance through 2030
  • June–July 2026: the ban rode the 21st Century ROAD to Housing Act (H.R. 6644); the House agreed 358-32 on June 23, and it became Public Law 119-101 on July 11, 2026, sent to the Archivist unsigned. It bars the Federal Reserve from issuing a CBDC through 2030 (Congress.gov, H.R. 6644 actions; The Block)
  • Trump signed GENIUS Act regulating private stablecoins as the preferred alternative

FedNow (distinct from CBDC): Launched July 2023 as instant payment settlement for banks. 5.1M transactions Jan-Aug 2025. The Fed explicitly states FedNow “is not related to a digital currency.”

The EU Digital Euro

ECB began preparation phase November 2023. Moved to next phase October 2025. Target regulation adoption 2026, potential pilot mid-2027, potential issuance 2029.

Privacy debate: ECB position: “does not support a programmable digital euro that would restrict how users can spend their money.” Promises pseudonymization and encryption. Critics argue these policies risk undermining privacy guarantees. Some EU policymakers have expressed interest in programmable features, creating tension — the gap between ECB promises and what the legislative framework actually mandates is a live fight.

Nigeria’s eNaira — The Instructive Failure

Launched October 2021. Less than 0.5% adoption. IMF reported 98.5% of issued wallets never used. By July 2024: 12% opened wallets, only ~2.2M transactions.

At the Cedi @ 60 conference (November 2025), a CBN official admitted the eNaira is “not a rosy story” and that Nigerians “were not interested.” Nigeria shifting to wholesale CBDC only, abandoning the retail experiment.

The cash crisis turned violent. AFP, 15 February 2023: “Rioters attacked bank ATMs and blocked roads in three Nigerian cities”; in Delta State, police said “unguided youths/miscreants in the name of protests” set two banks and two vehicles on fire. (AFP via Citizen Digital)

Privacy and Civil Liberties Opposition

Cato Institute: Nicholas Anthony, leading voice. Author of Digital Currency or Digital Control? Cato analysis of Fed public comments: two-thirds opposed a digital dollar. “CBDCs are a nightmare for civil liberties… they put governments at the center of every transaction.”

ACLU: Jay Stanley: “When you’re talking about ordinary people and ordinary transactions, we don’t think that the tentacles of the government’s surveillance infrastructure should reach down to that level.”

Human Rights Foundation: CBDC Tracker monitoring 119+ countries. “The central bank is the ultimate authority, possessing absolute power over the network and its users.”

Fed internal skeptics:

The Social Credit Connection

The thesis: Programmable money + behavioral data = financial punishment without due process.

China: Social credit system blocked 26 million air-ticket purchase attempts for “untrustworthy” individuals by mid-2019 — before e-CNY was widely deployed. The e-CNY provides the infrastructure to automate financial consequences: freeze wallets, restrict purchases, limit transaction amounts, triggered by behavioral scores.

The Canada precedent (non-CBDC, illustrative): February 2022: Trudeau invoked Emergencies Act against Freedom Convoy protesters. 200+ accounts frozen totaling ~CA$7.8 million, without court orders. Banks could “immediately freeze or suspend an account” under emergency powers. Canadian court later ruled the government was “not justified.”

Cato: “both an attack on freedom in the current financial system and a cautionary tale of what might happen with CBDC.”

Arguments FOR CBDCs

1.4 billion adults globally remain unbanked. CBDCs could enable person-to-person transfers via e-wallets without bank accounts. Cross-border payments currently take days and cost 6-7% in fees. Governments get auditable ledgers for fighting financial crime. Central banks could distribute stimulus directly to citizens.

Tracking Resources

researchthe-ratchetcbdcprogrammable-moneye-cny
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