In recent years, cryptocurrency and blockchain technology have attracted widespread attention in the global financial market. Wall Street institutional investors, central banks, and retail investors have shown growing interest in cryptocurrencies. According to CoinShares' 2024 data, the amount of funds flowing into cryptocurrency funds and products in 2023 reached a record high of $4.5 billion, reflecting the market's enthusiasm for digital assets. The total global wealth is about $400 trillion, and the US wealth is about $140 trillion. Cryptocurrencies currently account for 0.5% of global wealth, and it is expected that this may increase to 1% by the end of 2025. This growth trend shows that cryptocurrencies are gradually becoming a mainstream investment option from a marginal asset class.
As the most well-known cryptocurrency, Bitcoin has attracted a lot of attention, but its structure and price volatility have also sparked controversy. Critics point out that Bitcoin lacks a source of income, a user base, liquidity services or practical uses, and its value is seen as a self-fulfilling bubble. However, investors' interest in cryptocurrencies is not limited to Bitcoin, and the potential of blockchain technology has become a key driver in attracting funds. According to CB Insights data, in the first quarter of 2023, startups focusing on blockchain raised about $2.5 billion, exceeding the total for the whole of 2020, showing the broad application prospects of blockchain technology in finance, supply chain, medical care and other fields.
Latest developments in the cryptocurrency market
As of June 2025, the total market value of the global cryptocurrency market is about $2.5 trillion, of which Bitcoin accounts for about 50% of the market share and Ethereum accounts for about 20%. Other major cryptocurrencies include Binance Coin (BNB), Cardano (ADA) and Solana (SOL). In 2024, the cryptocurrency market experienced significant volatility. After breaking through $60,000 at the end of 2023, the price of Bitcoin peaked at $90,000 in early 2024, and then fell back to around $70,000. This volatility stems from market speculation, the macroeconomic environment (such as interest rate changes), and uncertainty in regulatory policies. The participation of institutional investors further promoted market growth. In 2023, the U.S. Securities and Exchange Commission (SEC) approved multiple Bitcoin spot exchange-traded funds (ETFs), attracting billions of dollars in institutional funds. Asset management giants such as BlackRock and Fidelity launched cryptocurrency-related products, marking the deepening integration of traditional finance and digital assets. Retail investors also actively participated through platforms such as Coinbase and Binance. In 2024, the number of global cryptocurrency users exceeded 500 million, a significant increase from 100 million in 2020.
Nevertheless, the volatility of cryptocurrencies remains a major risk. The "crypto winter" in 2022 led to the collapse of platforms such as Terra-Luna and FTX, and investors lost billions of dollars. In 2023, the market gradually recovered, but regulation remains a key challenge. Major economies such as the United States, the European Union and China are formulating stricter cryptocurrency regulations to balance innovation and financial stability.
Wide Application of Blockchain Technology
As the underlying architecture of cryptocurrency, blockchain technology has shown great potential outside the financial field due to its decentralized, transparent and tamper-proof characteristics. In 2024, the global blockchain market size is expected to reach US$67 billion, and is expected to grow to US$227 billion by 2030, with a compound annual growth rate of approximately 66.2%. The following are the applications of blockchain in major areas:
Financial services
Blockchain simplifies cross-border payments, trade financing and asset tokenization. JPMorgan's Onyx platform uses blockchain to process interbank transactions, with transaction volume exceeding US$1 trillion in 2023.
Supply chain management
The Food Trust blockchain platform jointly developed by Walmart and IBM tracks the food supply chain, improves transparency and efficiency, and will cover more than 500 suppliers worldwide in 2024.
Healthcare
Blockchain is used to securely store patient data, ensuring privacy and data integrity. In 2023, the amount of financing for medical blockchain startups increased by 30% to US$1.5 billion.
Smart Contracts
Smart contracts supported by platforms such as Ethereum automatically execute contract terms and are widely used in insurance, real estate and legal fields.
The rise of central bank digital currencies (CBDCs)
Central banks have responded positively to the rise of cryptocurrencies, and research and pilots on CBDCs have increased rapidly around the world. According to a 2024 survey by the Bank for International Settlements (BIS), 86% of central banks are exploring CBDCs, a significant increase from 65% in 2017. CBDCs are seen as a tool to address the challenges of private cryptocurrencies such as Bitcoin and stablecoins, aiming to prevent financial exclusion and the risk of "digital dollarization", that is, the payment system is dominated by privately controlled digital assets.
CBDCs are divided into wholesale and retail types. Wholesale CBDCs are used for interbank settlements, such as the Jasper-Ubin project in Singapore and Canada, which enables faster and lower-cost cross-border payments through blockchain technology. Retail CBDCs are open to the public and provide cash-like digital payment methods. Countries such as China, Sweden and the Bahamas are leading the way in retail CBDCs.
China's digital renminbi (e-CNY) is one of the most advanced CBDC projects in the world. By the end of 2024, the digital renminbi pilot covered 23 cities across the country, with a transaction volume of more than 200 billion yuan (about 28 billion US dollars). It is partly based on blockchain technology, but combined with traditional clearing mechanisms to ensure efficiency and controllability. Sweden's e-krona project aims to respond to the trend of declining cash usage, and the pilot will be expanded to retail payment scenarios in 2024. The Bahamas' Sand Dollar is the world's first fully launched retail CBDC, with a 50% increase in transaction volume in 2023, mainly used for small payments.
Europe's Exploration of the Digital Euro
The European Central Bank (ECB) is actively promoting the digital euro project, which aims to bring the euro system into the digital age. The digital euro will be a supplement to cash, not a substitute, and will be issued by the ECB and the central banks of euro area countries. It will be used through smartphone applications or offline payment cards (such as via Bluetooth or QR codes) and is suitable for both online and offline transactions. The ECB's goal is to ensure the security, efficiency and privacy protection of the digital euro while maintaining trust in the payment system.
Design and objectives of the digital euro
The ECB launched the digital euro project in July 2021 and plans to complete technical development and legislative preparation by 2026. According to the ECB’s 2024 report, the design of the digital euro needs to meet the following requirements:
Accessibility
Ensure access to all citizens and businesses through banks or direct accounts.
Security
Use encryption and distributed ledger technology (DLT) to prevent fraud and cyber attacks.
Privacy protection
While meeting the requirements of anti-money laundering (AML) and knowing your customer (KYC), it protects user privacy to the greatest extent.
Efficiency
Reduce the cost and time of cross-border payments and retail transactions. Currently, cross-border transfers in the Eurozone take an average of 1-2 days, and the cost is about 0.5%-1%.
Environmental sustainability
Reducing the energy consumption of payment systems, outperforming the infrastructure of cash and traditional electronic payments.
The ECB’s 2023 public consultation collected more than 8,000 responses, showing that European citizens are highly concerned about privacy and security. About 79% of euro area payments are still mainly cash-based, but the proportion of electronic payments has increased from 41% in 2017 to 48% in 2023, especially in countries such as the Netherlands, where young people prefer cashless payments. The COVID-19 pandemic has accelerated this trend, with contact payments and e-commerce transactions growing by 30% between 2020 and 2023.
Advantages and Challenges of Digital Euro
The digital euro aims to address the challenges of private cryptocurrencies such as Bitcoin and stablecoins (such as Tether and USDC). These private assets are highly volatile and lack the support of trusted institutions, which may threaten financial stability. The digital euro provides stability through central bank endorsement and supports the digital transformation of the European economy. Potential advantages include:
Promoting innovation
The digital euro can serve as a unified platform for the European payment system, supporting peer-to-peer payments and e-commerce.
Maintain monetary sovereignty
Prevent private digital currencies (such as Libra/Diem) from dominating the payment market.
Reduce costs
The ECB estimates that the digital euro can reduce cross-border payment costs to 1/3 of traditional bank transfers.
Environmental benefits
Compared to high-energy-consuming cryptocurrencies such as Bitcoin, the design of the digital euro focuses on low-energy consumption technology.
However, the implementation of the digital euro faces multiple challenges:
Financial stability risks
If the public converts bank deposits to digital euros on a large scale, it may trigger bank runs, especially in times of crisis. The ECB is studying whether to set limits on individual holdings.
Privacy and regulatory balance
The public demands anonymous payments, but AML and KYC regulations require tracking of suspicious transactions. The ECB plans to adopt a layered privacy model, with small transactions anonymous and large transactions traceable.
Technical complexity
The digital euro needs to choose the right architecture between blockchain and traditional systems. The ECB prefers a hybrid model that combines the transparency of blockchain with the stability of traditional systems.
International competition
China's leading position in the digital renminbi puts pressure on Europe. The ECB expects that it will take 4-5 years for the full launch of the digital euro, and China is already using it in practice.
The attitude of European companies
According to a survey of 652 German companies in 2023, 78% of companies (with 50 or more employees) support the introduction of the digital euro, and only 20% believe it is not feasible. The main reasons for support include:
Response to private digital currencies
69% of companies believe that the digital euro can prevent private currencies such as Bitcoin or Libra from undermining Europe’s monetary sovereignty.
Support digital payments
64% believe that the digital euro can ensure that citizens can still directly access central bank currency when the use of cash decreases.
Innovative monetary policy tools
60% believe that the digital euro can improve the efficiency of monetary policy transmission, especially in times of crisis.
Automated payments
40% support a “programmable euro” for machine-to-machine (M2M) payments, such as automatic transactions between IoT devices.
However, 65% of businesses are concerned about data privacy risks and worry that the ECB may obtain too much payment data. 50% believe that the digital euro may weaken the role of banks in crises, and only 3% of banks and financial service providers are completely opposed to the digital euro.
Global Perspective: CBDC Progress in Other Countries
China
The digital RMB (e-CNY) has entered the large-scale pilot stage, with a year-on-year increase of 40% in transaction volume in 2024. Its goal is to reduce dependence on the US dollar and promote the use of RMB in international trade.
Sweden
The e-krona project addresses the decline in cash use (only 10% of payments in 2023). The pilot tested offline payments and smart contract functions.
United States
The Federal Reserve is cautious about CBDC, and a research report released in 2024 emphasizes privacy and financial stability issues. During the 2020 epidemic, Congress proposed the direct issuance of digital dollars, but it was not implemented.
Singapore
Explore wholesale CBDC through the Jasper-Ubin project, and cooperate with the Reserve Bank of India to test cross-border payments in 2023, reducing transaction confirmation time from 2 days to seconds.
Technical integration of blockchain and CBDC
The application of blockchain technology in CBDC has attracted much attention, but not all CBDCs rely on blockchain. China's digital RMB partially uses blockchain, but combines centralized clearing to improve efficiency. The ECB is testing distributed ledger technology (DLT) and working with Singapore's Ocean Protocol to develop solutions for data sovereignty and real-time statistical updates. In 2024, the German Federal Bank announced a partnership with Ocean Protocol to launch a blockchain-based payment data platform, which is expected to be put into use in 2026.
The decentralized nature of blockchain conflicts with the central bank's need for centralized control. The ECB prefers a hybrid architecture that combines the transparency of blockchain with the controllability of traditional systems. In 2024, ECB trials showed that a DLT-based digital euro could reduce cross-border payment times to 10 seconds and costs by 80%.
Case Study: Venezuela's Cryptocurrency Experiment
Venezuela's experience demonstrates the potential of cryptocurrencies in extreme economic environments. The country has been caught in hyperinflation since 2016, with the bolivar currency depreciating by 99.9% in two years. In 2018, the government launched El Petro, a cryptocurrency backed by oil reserves, but it failed due to poor management and technical problems. Despite this, private platforms such as Valiu use stablecoins (such as USDT) to help citizens cope with inflation. In 2023, the Valiu platform processed more than $30 million in transactions, covering 150,000 households, showing the practicality of cryptocurrencies in crises.
Valiu's success stems from its ability to provide merchants and consumers with a stablecoin payment solution in US dollars, reducing their reliance on the bolivar. In 2024, about 20% of retail transactions in Venezuela used stablecoins, highlighting the role of cryptocurrencies in unstable economies. However, lack of regulation and infrastructure limits its widespread adoption.
Future Outlook of Digital Euro
The ECB plans to decide in 2026 whether to fully launch the digital euro, which is expected to be put into use in 2027-2028. The digital euro will be stored in a virtual wallet and support online and offline payments. Commercial banks will continue to manage accounts to ensure compatibility with the existing financial system. Unlike crypto assets such as Bitcoin, the digital euro is endorsed by the ECB and aims to provide stability, security and traceability.
The launch of the digital euro will have a profound impact on the European financial system. It may reshape the payment market, promote cross-border trade, and enhance the competitiveness of the euro in global finance. However, the key to success lies in balancing innovation and regulation, privacy and transparency, efficiency and stability. The ECB needs to work closely with the European Parliament, the European Commission and the Eurogroup to ensure that legislation and technology are well prepared.
Conclusion
Cryptocurrency and blockchain technology are reshaping the global financial landscape. The interest of Wall Street, central banks and retail investors has driven rapid market growth, and the rise of CBDC marks the digital transformation of legal tender. As a strategic initiative in Europe, the digital euro aims to meet the challenges of private cryptocurrencies, safeguard monetary sovereignty, and promote economic digitalization. Despite the challenges of technology, privacy and financial stability, the prospects for the digital euro are exciting. Globally, the CBDC experience of China, Sweden and other countries provides valuable reference for Europe. With the advancement of technology and the improvement of supervision, digital currency is expected to become a core component of the future financial system.
Hui Xin
Davin
YouQuan
Joy