The concept of money has undergone significant transformations over the millennia. In ancient times, societies relied on barter systems, where goods and services were exchanged directly. The limitations of barter led to the use of commodity money, such as grains, livestock, and eventually precious metals like gold and silver, which had intrinsic value and were widely accepted.

The invention of coinage around 600 BCE in Lydia (modern-day Turkey) marked a pivotal moment in monetary history, as it provided a standardised medium of exchange. This was followed by the introduction of paper money in China during the Tang Dynasty (618-907 CE) as promissory notes, allowing merchants to deposit their coins with a trustworthy agent who would issue a paper certificate that could be redeemed elsewhere, facilitating transactions without the need to carry heavy coins.

_{Image of a modern reproduction of a (Southern) Song Dynasty era Guanzi banknote, issued under the reign of the (Southern) Song Dynasty, Public Domain.}

The significant development and widespread use of paper money as a government-issued currency occurred during the Song Dynasty (960-1279 CE). The Song government began to standardise and issue paper money in the early 11th century. The earliest government-issued paper currency was known as 'jiaozi', and later, during the Southern Song period, another type called 'huizi' was introduced. These innovations made the Song Dynasty the first in history to use government-backed paper money on a large scale, which eventually replaced the earlier promissory notes, became a cornerstone of the economy, and spread to become the dominant form of currency.

The 20th century saw the rise of fiat currencies, where the value of money is not backed by physical commodities but by the government that issues it. This shift allowed for greater flexibility in monetary policy but also introduced new challenges in maintaining trust and stability.

The advent of the digital age has brought another seismic shift in the form of digital currencies. The late 2000s witnessed the emergence of cryptocurrencies, with Bitcoin being the first and most well-known example. Created in 2009 by an anonymous entity known as Satoshi Nakamoto, Bitcoin introduced the concept of a decentralised, peer-to-peer digital currency that operates independently of central banks and governments.

The rapid proliferation of cryptocurrencies highlighted both the potential and the risks of digital money, prompting central banks to explore their own digital currency solutions. The rise of digital payments, the decline in cash usage, the impact of the COVID-19 pandemic on financial behaviours, and the need to stay competitive in a rapidly evolving financial landscape have driven central banks to consider CBDCs as a natural progression in the evolution of money.