COMPARATIVE ANALYSIS OF EUROPEAN AND CHINESE CENTRAL BANKS’ DIGITAL CURRENCIES

Abstract

Central Bank Digital Currencies (CBDCs) are being considered as a new instrument of payment in more than 130 countries worldwide. Among the largest economies, China and the euro area countries have made the most significant progress and their digital currencies - the digital yuan and the digital euro - are attracting considerable academic attention. Although the comparison of these currencies has been explored in academic literature, some aspects remain unaddressed and research is fragmented. The aim of this paper is to carry out a comparative analysis of the digital euro and the digital yuan based on the CBDC criteria identified in the academic literature. The results revealed that both currencies are based on a hybrid account and token-based model, a two-tier distribution system and share similar implementation motivations, such as increasing resilience to the dominance of private payment providers and the growing popularity of cryptocurrencies. However, fundamental differences emerged when analysing the central banks' approach to consumer privacy, with the European Central Bank aiming for anonymity and China giving authorities greater control over data. There are also differences in strategic objectives: China aims to reduce its dependence on the US dollar and strengthen the international role of the yuan, while the euro area focuses on maintaining the region's competitiveness and the effectiveness of monetary policy.