Privacy-protected CBDCs shorten retail-payment settlement by at least 20%

What's this about?

People disagree about whether private CBDCs can make shop payments finish at least 20% faster.

A CBDC is digital money made by a central bank.

What supporters say

• A CBDC could finish a payment as soon as someone sends it.
• Some bank systems group payments and finish them later, which can cause delays.
• Tests called Project Hamilton showed that CBDCs could handle many payments quickly.
• Another test, Aurum 2.0, showed that fast CBDCs could also protect user privacy.

What critics say

• Test projects show what might work, not what happens for real shoppers.
• Fast lab tests do not prove that every part of a payment becomes faster.
• A CBDC helps most when it replaces slow bank transfers that run in groups.
• We have no real-world proof that private CBDCs cut payment time by 20% or more.

The bottom line

CBDCs could be both fast and private, and they might greatly help in some slow payment systems.

But the evidence does not yet prove a 20% cut in real shop payment times.

The claim is that retail central bank digital currencies, or CBDCs, with legally enforceable privacy protections can cut payment settlement times by at least 20% compared with today’s digital payment methods. Available evidence suggests such systems could be both private and fast, but does not show that they deliver that specific improvement in real-world use.

The case for

CBDCs could, in principle, settle retail payments immediately. Unlike systems that process transactions in batches or require later reconciliation between banks, a digital currency issued by a central bank could be built to provide final settlement as soon as a payment is made. That could reduce delays in some parts of the payments system. Immediate final settlement is a genuine technical possibility for CBDCs. 1

Research projects also show that speed and privacy do not have to conflict. Project Hamilton, a U.S. prototype developed by the Federal Reserve Bank of Boston and MIT, tested systems capable of handling a high volume of CBDC transactions. Its work suggests that a CBDC could ease certain processing and reconciliation limits found in other payment arrangements.

Other projects have made a similar point on privacy. The Bank for International Settlements’ Aurum 2.0 prototype examined ways to include privacy-enhancing features in a retail-CBDC system. Together, these projects support the narrower conclusion that a CBDC can be designed to be both operationally fast and privacy-oriented. 2

That matters most where the alternative is a slower payment system. If consumers and businesses are moving from scheduled, batch-based bank transfers to a CBDC with immediate settlement, the improvement could be substantial. In that setting, a 20% reduction in settlement time is conceivable.

But these demonstrations establish technical feasibility, not a measured result for consumers. High transaction throughput in a laboratory or prototype is not the same as proving faster end-to-end settlement in everyday retail payments.

The case against

The largest problem for the claim is that many existing payment systems are already extremely fast. In the United States, FedNow settles eligible payments within seconds. In Europe, the Eurosystem’s TIPS service settles instant payments continuously in central-bank money. These systems leave limited room for a CBDC to produce a major further reduction in settlement time. Existing instant-payment rails already provide near-immediate settlement, weakening any automatic CBDC advantage. 3

The evidence also does not provide the required comparison. There is no broad, cross-country estimate showing that privacy-protected CBDCs reduce average retail settlement times by 20% or more against clearly defined existing digital alternatives. The available studies cover prototypes, design work and early deployments, but they do not offer matched real-world data on privacy rules, consumer settlement times and comparable payment methods. No comparable empirical estimate supports the 20% threshold. 4

The baseline makes an enormous difference. A CBDC might be much faster than a traditional automated clearing house payment that is processed in batches. Yet it may offer little or no measurable speed improvement over an instant-payment service that already settles in seconds. Treating all “existing digital payment methods” as one category hides that difference.

Early CBDC experience also points to practical limits beyond the central ledger. Evidence from Caribbean and Nigerian projects indicates that real-world performance depends on wallet design, merchant acceptance, access to the system, interoperability, incentives and operational choices. Compliance checks, conversion processes and the role of intermediaries can also affect how quickly a consumer experiences a completed payment.

Finally, privacy protections themselves are not shown to cause faster settlement. Privacy is largely a question of law, system governance, technical design and compliance rules. Those safeguards may be compatible with fast processing, but they do not by themselves make payments settle faster. 5

The bottom line

The evidence supports a limited conclusion: privacy-oriented CBDCs can be technically feasible and potentially fast. They could offer meaningful gains where they replace slower, batch-based payment systems.

But the stronger claim — that legally privacy-protected CBDCs shorten average retail-payment settlement by at least 20% compared with existing digital methods — is not supported by current evidence. The key gap is the absence of harmonized, real-world comparisons that measure legal privacy protections, end-to-end settlement times and like-for-like alternatives.

Confidence in that assessment is high. The main uncertainty is not conflicting evidence, but the lack of the production data needed to calculate and verify the claimed average improvement.