Centralization and Decentralization of Digital Currencies: A Comparative Analysis of CBDC, Bitcoin and Ether

The evolution of the global digital financial system is generating two main forms of digital currencies: a centralized currency system, such as Central Bank Digital Currency (CBDC), and a decentralized cryptocurrency system, like Bitcoin and Ether. This study aims to analyze the conceptual differences between the centralized (CBDC) and decentralized (Bitcoin and Ether) models and each operating mechanism. The study also examines how both models impact the stability of the economy and adherence to Shariah principles. Using the qualitative approach and exploratory design, the study examines materials on CBDC, Bitcoin, and Ether. The study collects data from central bank reports, monetary policy documents, academic articles, and technical papers published by relevant institutions. The content analysis method should identify similarities and differences between the currencies in terms of system architecture, infrastructure, technological efficiency, energy, governance and compatibility with Shariah principles. According to the study, CBDC, Bitcoin and Ether represent three distinct paradigms: Bitcoin's decentralized system, through proof-of-work, produces rather limited functionality to emphasise individual freedom and privacy, while Ether innovates the system via a switch to proof-of-stake and smart contracts, which leads to greater functionality. CBDC, on the other hand, maintains a centralized system to ensure monetary stability, but with a compromise on users' privacy. Hence, while maintaining the value of blockchain transparency and traceability without sacrificing economic stability, the study proposes a hybrid approach in order to improve transaction efficiency. The study suggests implementing a regulatory sandbox involving authorities, economists and Shariah experts as an initial test measure of this innovation to ensure security for users and compliance with the principles of Shariah in the development of a healthier digital financial ecosystem.

CBDC, Bitcoin, Ether, DeFi, Blockchain, Smart Contracts

1. Abdullah, A., & Oseni, U. A. (2021). Fintech in Islamic finance: Theory and practice. Routledge. [Google Scholar] [Crossref]

2. Acharya, V. V., Philippon, T., Richardson, M., & Roubini, N. (2013). The financial crisis of 2008: Causes and consequences. Critical Review, 21(2–3), 195–210. https://doi.org/10.1080/08913810902952903 [Google Scholar] [Crossref]

3. Adrian, T., & Mancini-Griffoli, T. (2019). The rise of digital money (IMF FinTech Note No. 19/01). International Monetary Fund. https://doi.org/10.5089/9781498324908.063 [Google Scholar] [Crossref]

4. Khairuddin, A., Azmir, M. F. N., Zakaria, S. N. A., & Musa, M. R. (2025). Fundamentals of modern money and its application to central bank digital currency (CBDC): An exploratory Shariah analysis (Bank Negara Malaysia Working Paper No. WP3/2025). Bank Negara Malaysia. Retrieved from https://www.bnm.gov.my/documents/20124/301148/WP3-2025.pdf [Google Scholar] [Crossref]

5. Al-Mashaqbeh, I. (2024). Central bank digital currency (CBDC) in the Islamic economy: Policy perspectives. Journal of Islamic Monetary Studies, 6(1), 45–63. [Google Scholar] [Crossref]

6. Al-Qaradaghi, A. (2022). Fiqh al-muʿāmalāt al-muʿāṣirah. Dār al-Qalam. [Google Scholar] [Crossref]

7. Al-Qaradawi, Y. (1995). Fiqh al-zakāh. Muʾassasah al-Risālah. [Google Scholar] [Crossref]

8. Allen, F., Gu, X., & Jagtiani, J. (2022). Fintech, cryptocurrencies, and CBDC: Financial structural transformation in China. Journal of International Money and Finance, 124(C). [Google Scholar] [Crossref]

9. Antonopoulos, A. M. (2017). Mastering Bitcoin: Programming the open blockchain (2nd ed.). O’Reilly Media. [Google Scholar] [Crossref]

10. Anwer, Z., Khan, S., & Abu Bakar, M. (2020). Sharīʿah-compliant central banking practices: Lessons from Muslim countries’ experience. ISRA International Journal of Islamic Finance, 12(1), 7–26. https://doi.org/10.1108/IJIF-01-2019-0007 [Google Scholar] [Crossref]

11. Auer, R., & Böhme, R. (2020). The technology of retail central bank digital currency. BIS Quarterly Review, March. https://www.bis.org/publ/qtrpdf/r_qt2003j.pdf [Google Scholar] [Crossref]

12. Auer, R., Cornell, G., & Frost, J. (2022). Rise of the central bank digital currencies: Drivers, approaches and technologies. BIS Working Papers, No. 880. Bank for International Settlements. https://www.bis.org/publ/work880.pdf [Google Scholar] [Crossref]

13. Auer, R., Cornelli, G., & Frost, J. (2020). Rise of the central bank digital currencies: Drivers, approaches and technologies (BIS Working Paper No. 880). Bank for International Settlements. https://doi.org/10.2139/ssrn.3602757 [Google Scholar] [Crossref]

14. Bakos, Y., & Halaburda, H. (2022). Permissioned vs. permissionless blockchain platforms: Trade-offs in trust and performance. Boston University Questrom School of Business. https://questromworld.bu.edu/platformstrategy/wp-content/uploads/sites/49/2022/07/PlatStrat2022_paper_14.pdf [Google Scholar] [Crossref]

15. Bank for International Settlements & Committee on Payments and Market Infrastructures. (2024, October). Tokenisation in the context of money and other assets: Concepts and implications for central banks (BIS CPMI Report No. D225). https://www.bis.org/cpmi/publ/d225.pdf [Google Scholar] [Crossref]

16. Bank for International Settlements. (2020). Central bank digital currencies: foundational principles and core features. Report No. 33. https://www.bis.org/publ/othp33.htm [Google Scholar] [Crossref]

17. Bank for International Settlements. (2022). Project mBridge: Connecting economies through CBDC. BIS Innovation Hub. https://www.bis.org/about/bisih/topics/cbdc/mbridge.htm [Google Scholar] [Crossref]

18. Bank for International Settlements. (2023). Annual economic report 2023: Blueprint for the future monetary system. BIS. [Google Scholar] [Crossref]

19. Bank for International Settlements. (2023). Project Polaris: A handbook for offline payments with CBDC. BIS Innovation Hub. https://www.bis.org/about/bisih/topics/cbdc/polaris.htm [Google Scholar] [Crossref]

20. Bank for International Settlements. (2024). Central bank digital currencies: Legal and system design considerations (BIS Occasional Paper No. 88). https://www.bis.org/publ/othp88.htm [Google Scholar] [Crossref]

21. Baur, D. G., Hong, K., & Lee, A. D. (2018). Bitcoin: Medium of exchange or speculative asset? Journal of International Financial Markets, Institutions & Money, 54, 177–189. [Google Scholar] [Crossref]

22. Bech, M. L., & Garratt, R. (2017). Central bank cryptocurrencies. BIS Quarterly Review, September, 55–70. [Google Scholar] [Crossref]

23. Bindseil, U., & Senner, R. (2024, September 26). Macroeconomic modelling of CBDC: A critical review (SUERF Policy Note No. 347). SUERF – The European Money and Finance Forum. https://www.suerf.org/publications/suerf-policy-notes-and-briefs/macroeconomic-modelling-of-cbdc-a-critical-review/ [Google Scholar] [Crossref]

24. Biryukov, A., Khovratovich, D., & Pustogarov, I. (2014). Deanonymisation of clients in Bitcoin P2P network. In Proceedings of the 2014 ACM Conference on Computer and Communications Security (pp. 15–29). Association for Computing Machinery. https://doi.org/10.1145/2660267.2660379 [Google Scholar] [Crossref]

25. BlockApps. (2024). Ethereum energy consumption after the Merge (BlockApps Technical Report). BlockApps. https://blockapps.net/ethereum-energy-consumption-after-the-merge/ [Google Scholar] [Crossref]

26. Brito, J., & Castillo, A. (2013). Bitcoin: A primer for policymakers. Mercatus Center, George Mason University. [Google Scholar] [Crossref]

27. Buterin, V. (2015). Ethereum white paper: A next-generation smart contract and decentralized application platform. Ethereum Foundation. [Google Scholar] [Crossref]

28. Cambridge Centre for Alternative Finance. (2024). Cambridge Bitcoin Electricity Consumption Index (CBECI). University of Cambridge. https://ccaf.io/cbnsi/cbeci [Google Scholar] [Crossref]

29. Chapra, M. U. (2008). The Islamic vision of development in the light of the Maqasid al-Shariʿah (Occasional Papers No. 235). Islamic Research and Training Institute. https://ideas.repec.org/p/ris/irtiop/0235.html [Google Scholar] [Crossref]

30. Commey, D., & Nkenyereye, L. (2024). Foundations of cyber resilience: The confluence of game theory, machine learning, and cyber deception (arXiv Preprint No. arXiv:2404.01205). https://arxiv.org/html/2404.01205v1 [Google Scholar] [Crossref]

31. Cong, W., He, Z., & Li, J. (2020). Decentralized mining in centralized pools. The Review of Financial Studies, 34(2), 1191–1235. https://doi.org/10.1093/rfs/hhaa040 [Google Scholar] [Crossref]

32. Conti, M., Kumar, E. S., Lal, C., & Ruj, S. (2019). A survey on security and privacy issues of blockchain technology. IEEE Communications Surveys & Tutorials, 21(2), 1–34. [Google Scholar] [Crossref]

33. de Vries, A., Gallersdörfer, U., Klaaßen, L., & Stoll, C. (2023). Environmental impact of cryptocurrencies: Energy and carbon footprint. Nature Climate Change, 13(2), 156–163. [Google Scholar] [Crossref]

34. Duan, J., Zhang, C., & Chen, Z. (2020). Blockchain applications in supply chain management. Computers & Industrial Engineering, 149, 106789. [Google Scholar] [Crossref]

35. El Amri, M., & Mohammed, M. (2019). The analysis of cryptocurrency based on Maqasid al-Shariʿah. In FinTech and Islamic Finance (pp. 117–132). Springer. https://doi.org/10.1007/978-3-030-10749-9_8 [Google Scholar] [Crossref]

36. El-Gari, M. A., Djafri, F., & Soualhi, Y. (2021). Islamic finance: Shariah and the SDGs – Thought leadership series part 4. https://www.researchgate.net/publication/354912931 [Google Scholar] [Crossref]

37. Ethereum Foundation. (2021, November 29). How the Merge impacts the application layer and developer experience. Ethereum Foundation Blog. https://blog.ethereum.org/2021/11/29/how-the-merge-impacts-app-layer [Google Scholar] [Crossref]

38. Ethereum Foundation. (2025, August 29). Protocol update 003 – Improve UX. Ethereum Foundation Blog. https://blog.ethereum.org/2025/08/29/protocol-update-003#project-2-ethereum-interoperability-layer [Google Scholar] [Crossref]

39. European Central Bank. (2022). Progress on the investigation phase of a digital euro. https://www.ecb.europa.eu/paym/digital_euro/investigation/governance/shared/files/ecb.digital_euro_governance~47e2003d79.en.pdf [Google Scholar] [Crossref]

40. European Union. (2023). Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets. https://eur-lex.europa.eu/eli/reg/2023/1114/oj/eng [Google Scholar] [Crossref]

41. FATF. (2023). Targeted update on implementation of the FATF standards on virtual assets/VASPs. FATF. https://www.fatf-gafi.org [Google Scholar] [Crossref]

42. Gallersdörfer, U., Klaaßen, L., & Stoll, C. (2020). Energy consumption of cryptocurrencies beyond Bitcoin. Joule, 4(9), 1843–1856. [Google Scholar] [Crossref]

43. Harvey, C. R., Ramachandran, A., & Santoro, J. (2021). DeFi and the future of finance. Wiley. [Google Scholar] [Crossref]

44. Hassan, M. (2025). Cryptocurrency – Analysis of Bitcoin performance. International Journal of Economics and Finance, 17(5), 43. https://doi.org/10.5539/ijef.v17n5p43 [Google Scholar] [Crossref]

45. Hassan, M. K., Muneeza, A., & Mohamed, I. (2025). Cryptocurrencies from an Islamic perspective. Journal of Islamic Accounting and Business Research, 16(2), 390–410. https://doi.org/10.1108/JIABR-09-2022-0238 [Google Scholar] [Crossref]

46. Pati, U. K., & Sultan, S. (2022, December). Central Bank Digital Currency (CBDC) Shariah System for Islamic Bank Liquidity Management [Paper presentation]. International Conference on Islamic Finance and Economics, Kuala Lumpur, Malaysia. file:///Users/redouanalhabshi/Downloads/798-813.+Umi+Khaerah+Pati,+Sultan.pdf [Google Scholar] [Crossref]

47. People's Bank of China. (2021). Progress of research & development of e-CNY in China. Digital Currency Institute. http://www.pbc.gov.cn/en/3688110/3688172/4157443/4293696/2021071614584691871.pdf [Google Scholar] [Crossref]

48. Prayudya, D. R., & Al-Ayubi, S. (2023). Islamic central bank digital currency (CBDC) design. Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah, *14*(1). https://www.researchgate.net/publication/371963824_ISLAMIC_CENTRAL_BANK_DIGITAL_CURRENCY_CBDC_DESIGN [Google Scholar] [Crossref]

49. Reid, F., & Harrigan, M. (2013). An analysis of anonymity in the Bitcoin system. In B. M. S. Jajodia (Ed.), Security and privacy in social networks (pp. 197–223). Springer. https://doi.org/10.1007/978-1-4614-4139-7_10 [Google Scholar] [Crossref]

50. Rejeb, A., & Treiblmaier, H. (2024). Blockchain in Islamic finance: Opportunities and challenges. Journal of Islamic Accounting and Business Research, 15(2), 165–189. https://doi.org/10.1108/JIABR-07-2022-0176 [Google Scholar] [Crossref]

51. Rejeb, A., Keogh, J. G., & Treiblmaier, H. (2020). Blockchain technology in the smart city: A bibliometric review. Quality & Quantity, 54(5), 1411–1434. https://doi.org/10.1007/s11135-019-00934-9 [Google Scholar] [Crossref]

52. Rejeb, A., Rejeb, K., & Keogh, J. G. (2025). Centralized vs. decentralized ledgers in the money supply process: A SWOT analysis. International Journal of Information Management, 76, 102912. https://doi.org/10.1016/j.ijinfomgt.2023.102912 [Google Scholar] [Crossref]

53. Satoshi Nakamoto. (2008). Bitcoin: A peer-to-peer electronic cash system. https://bitcoin.org/bitcoin.pdf [Google Scholar] [Crossref]

54. Schär, F. (2021). Decentralized finance: On blockchain- and smart contract-based financial markets. Federal Reserve Bank of St. Louis Review, 103(2), 153–174. https://doi.org/10.20955/r.103.153-174 [Google Scholar] [Crossref]

55. Selgin, G. (2015). Synthetic commodity money. Journal of Financial Stability, 17, 92–99. https://doi.org/10.1016/j.jfs.2014.07.002 [Google Scholar] [Crossref]

56. Tindell, K. (2013, April 5). Geeks love the Bitcoin phenomenon like they loved the internet in 1995. Business Insider. https://www.businessinsider.com/geeks-love-bitcoin-2013-4 [Google Scholar] [Crossref]

57. Wamba, S. F., & Queiroz, M. M. (2020). Blockchain in the operations and supply chain management: Benefits, challenges and future research opportunities. International Journal of Information Management, 52, 102064. https://doi.org/10.1016/j.ijinfomgt.2019.102064 [Google Scholar] [Crossref]

58. Werner, S. M., Perez, D., Gudgeon, L., Klages-Mundt, A., Harz, D., & Knottenbelt, W. (2023). SoK: Decentralized finance (DeFi). In Proceedings of the 4th ACM Conference on Advances in Financial Technologies (AFT ’23) (pp. 1–18). Association for Computing Machinery. https://doi.org/10.1145/3604237.3626850 [Google Scholar] [Crossref]

59. Yan, L., Wang, Y., & Liu, Z. (2020). Transparency and security in public blockchains. Journal of Information Security and Applications, 54, 102553. https://doi.org/10.1016/j.jisa.2020.102553 [Google Scholar] [Crossref]

60. Zetzsche, D. A., Buckley, R. P., Arner, D. W., & Barberis, J. N. (2018). From FinTech to TechFin: The regulatory challenges of data-driven finance. New York University Journal of Law and Business, 14(2), 393–446. [Google Scholar] [Crossref]

• Assessment of the Role of Artificial Intelligence in Repositioning TVET for Economic Development in Nigeria
• Teachers’ Use of Assure Model Instructional Design on Learners’ Problem Solving Efficacy in Secondary Schools in Bungoma County, Kenya
• “E-Booksan Ang Kaalaman”: Development, Validation, and Utilization of Electronic Book in Academic Performance of Grade 9 Students in Social Studies
• Analyzing EFL University Students’ Academic Speaking Skills Through Self-Recorded Video Presentation
• Major Findings of The Study on Total Quality Management in Teachers’ Education Institutions (TEIs) In Assam – An Evaluative Study