Why Emerging Markets Are Winning the CBDC Race

Legacy infrastructure is the constraint. Developed nations are hindered by entrenched, profitable banking systems like SWIFT and ACH, making disruptive wholesale CBDC integration politically and technically complex.

Digital-first necessity drives adoption. Countries like Nigeria (e-naira) and The Bahamas (Sand Dollar) bypass card networks and brick-and-mortar banks, building financial inclusion directly on mobile-centric digital ledgers.

The testbed is real-world scale. Jamaica's JAM-DEX processes transactions in seconds for a population where cash reliance was over 20%, providing deployment data that G7 central banks lack.

Evidence: The BIS reports over 130 countries, representing 98% of global GDP, are exploring CBDCs, with all live retail CBDCs launched in emerging markets or small economies.

Financial inclusion is the primary catalyst. Over 1.4 billion adults globally lack access to basic banking. A digital public ledger operated by a central bank bypasses the need for costly physical branch infrastructure, directly reaching the unbanked.

The problem is payment system fragility. Legacy interbank settlement networks in many developing nations are slow and opaque. A wholesale CBDC provides a single, programmable source of truth, reducing settlement risk and counterparty exposure for commercial banks.

This contrasts with developed market motives. Projects like the ECB's digital euro or the Fed's FedNow service focus on monetary policy tools and competing with private stablecoins, not foundational financial access.

Evidence: Nigeria's eNaira processed $10M in its first month targeting 38% unbanked citizens, while the Bahamas' Sand Dollar achieved 93% penetration to service geographically dispersed islands.

Financial exclusion is the catalyst. Over 1.4 billion adults lack bank accounts, primarily in Africa and Southeast Asia. CBDCs like Nigeria's eNaira or the Bahamas' Sand Dollar provide a state-backed digital identity and payment rail, bypassing the need for costly physical bank infrastructure.

High remittance costs create urgency. Migrant workers lose ~6.3% of $860B in annual remittances to fees. CBDCs built on interoperable ledgers enable near-instant, sub-1% cross-border settlement, directly challenging the SWIFT/ Western Union duopoly.

Monetary policy execution is inefficient. Direct programmability of a CBDC allows for precise stimulus distribution and automated tax collection, a tool far more effective than blunt central bank rate adjustments in volatile economies.

Evidence: Jamaica's JAM-DEX achieved 8% adoption in 8 months by integrating with existing mobile wallets, proving that solving acute pain drives uptake faster than theoretical monetary innovation.

The West is trapped by its own efficient, private financial rails. Systems like Fedwire and SWIFT create a high bar for improvement, making CBDCs seem like a solution in search of a problem. This is a myopic view that ignores the global context.

Emerging markets lack this legacy burden. They are building on a blank slate, allowing them to leapfrog directly to programmable, interoperable digital cash. Their motivation is foundational financial inclusion, not incremental efficiency gains.

The technical architecture diverges. Western proposals often mimic existing bank-led models, while EM CBDCs are designed as public infrastructure from day one, akin to a sovereign, permissioned version of a public blockchain's settlement layer.

Evidence: Nigeria's eNaira processed over $10B in its first year, targeting the 55% of adults without bank accounts—a use case that doesn't exist in the West. China's digital yuan is integrated directly into super-apps like WeChat, achieving adoption Western wallet apps can't match.

Infrastructure-first pragmatism wins. Western CBDC projects like the Digital Euro or FedNow are paralyzed by political debates on privacy and monetary sovereignty. Nigeria's eNaira and China's digital yuan bypass this by targeting real-time settlement and financial inclusion for unbanked populations, treating the CBDC as a utility layer.

The private sector is the engine. Successful rollouts in the Bahamas (Sand Dollar) and Jamaica rely on partnerships with local banks and fintechs like M-Pesa, not central bank mandates. This creates a competitive infrastructure layer where adoption is driven by user-facing applications, not policy.

This mirrors DeFi's evolution. Just as Ethereum won by providing a settlement layer for Uniswap and Aave, the winning CBDC model provides rails for private innovation. The metric is transaction volume, not white papers; Jamaica's CBDC processed 400,000 transactions in its first year.