Uptake of CBDC increasing around the world

As fintech companies launch their own payment and cryptocurrency projects and regulators introduce new legislation to control these companies, central banks around the world continue to look at developing CBDC projects.

So, what exactly is a CBDC?

For starters, CBDC stands for Central Bank Digital Currency and is a virtual currency issued directly from a central bank. With stablecoins and cryptocurrencies becoming more and more popular, the world’s central banks have taken this step to create an alternative in order to play a bigger role in the “future of money.”

According to BIS President Benoît Cœuré, a global framework for the future of cryptocurrency should be agreed during 2022, citing the fact that the decentralized finance (DeFi) boom in popularity throughout 2021 represents something of a “wake-up call” for traditional banking institutions. .

European Central Bank (ECB) actions

These comments came in December of 2021, the year the European Central Bank decided to launch the investigation phase of a European digital project. This phase should last for 24 months, with the main objective of addressing key design and distribution issues.

Any European cryptocurrency will need to meet the needs of European users, while at the same time helping to prevent illegal activities and any destabilizing effect on monetary policy. At the time of writing, the European Central Bank has approved the creation of a new supervision framework for electronic payments, to include crypto assets and stablecoins.

This new framework will be designed with the aim of providing an oversight framework for assessing the efficiency and security of electronic payments. This will allow the European Central Bank to oversee the entire gamut of financial transactions, such as card payments, direct debit and credit transfers, as well as e-wallet payments, digital payment tokens and electronic money transfers.

Countries around the world focus on CBDC

There is a lot of activity currently happening around the world when it comes to CBDCs, with a large number of countries researching, testing and/or launching their own CBDC framework. In fact, 87 countries are in the process of exploring CBDC, a figure equal to 90% of global GDP.

Let’s take a closer look at the state breakdown of the many CBDC-focused states to gain a better understanding of the global state of play.

Countries that have already launched

So far, there are 9 countries that have so far reached the point where they are already launching their own digital currency, with
Nigeria Being the latest to take this step. e-Naira is the first to originate outside the shores of the Caribbean, while the other eight are made up of 7 ECCU countries and the Bahamas.

The European dollar is the central bank digital currency launched by the Eastern Caribbean Central Bank (ECCB), which has been around since March 2021. This was in collaboration with DCash, to bring the currency to the islands of Antigua, Grenada, Barbuda, Saint Lucia, Saint Kitts and Nevis.

The first national CBDC in Bahamas

After about 5 months, this was expanded to the Grenadines and Saint Vincent, with December seeing the deployment of the system in the Commonwealth of Dominica and Montserrat. As of this point, this particular CBDC now serves a total of 7 countries.

This new currency represents a digital version of the Bahamian dollar, with the creation of a financial ecosystem that includes Authorized Financial Institutions (AFI) to allow retail customers to access services. This comes in the form of wallet services, commercial banks, payment service providers, and money transfer companies.

Nigerian blockchain-based eNaira

When you look at the only non-Caribbean CBDC – eNaira – you see that it uses the same blockchain technology as Ethereum and Bitcoin. Currency – like Bitcoin & Ethereum – is stored in a digital wallet and can be transferred digitally or used for payment transactions.

It happens at virtually no cost to anyone, no matter where they are in the world, but there are some distinct differences between eNair and traditional cryptocurrencies. First of all, eNaira is subject to strict access controls to the central bank.

eNaira is not technically an asset

Second, eNaira is not an asset per se, but rather a nationally used digital currency that derives its value from Naira, a real-world currency with which it shares parity.

At this point, this is all of the countries that have already launched or are in the process of launching their own central digital currency. In the next section, we look at countries in the pilot phase of the procedure.

Nations in the experimental stage

Taking an overview of countries currently participating in CBD pilot programs around the world, there are 14 countries working to get to the point where they can officially and fully take off. Let’s take a closer look at these states in detail.

far East

China It is progressing with a CBDC known as “Yuan”, with a virtual version already being rolled out in a number of provinces.

South Korea Currently in the middle of a 10-month trial period to test a distributed ledger/blockchain currency. The first phase of the pilot project will run throughout 2021, with the second phase continuing until June 2022, focusing on digital asset purchases, offline payments and international transfers.

Hong Kong In the very early stages of experimenting with central bank digital currencies, its monetary authority recently took the initial steps in exploring central bank digital currency and created a technical document detailing the feasibility of e-HKD.

Thailand It is keen to maintain its financial stability, without affecting the monetary policy or the existing banks. Therefore, its digital currency will be distributed across financial institutions and will not pay interest. A beta trial is scheduled to begin in the second quarter of 2022, with the private sector collaborating with technology developers.

Singapore It has not provided a timeline for its digital currency initiative, but the Orchid retail project has been launched. The nation is also part of the Dunbar Project along with Australia, Malaysia and South Africa.

Europe

Sweden It has been part of the process since its inception, with the goal of having a digital krona by 2026.

Lithuania It is currently trialing LBCOIN, which is based on NEM blockchain technology, as part of a larger European Central Bank (ECB) investigation phase into Eurocoin. So far, no clear timetable has been provided.

Ukraine Currently experimenting with electronic hryvnia, which will be subject to the rules of electronic money in force in the country. The pilot is said to be underway sometime in 2022.

Middle east

United Arab Emirates (UAE) is working in tandem with Saudi Arabia and has a 4-year plan “The Aber Project” that will start from 2023 to 2026, and the creation of a digital digital currency is a priority, with the use of screening, insurance and monitoring systems planned.

Kingdom Saudi Arabia It was included as part of the Aber project, as part of the first beta version of a dual-issue CBDC based on blockchain or distributed ledger technology (DLT). What makes this project unique is that it has 2 central banks and 6 commercial banks from both countries.

Also in the beta phase is the Reserve Bank AustraliaAs part of the Dunbar project with the Monetary Authority of Singapore, the Reserve Bank of South Africa, the Central Bank of Malaysia and the Innovation Center Bank for International Settlements. This project will look at the development of Quorum and Corda.

Nations in development

In the next section, we look at jurisdictions that are currently in the development stage.

North America

Canada Active in considering use cases, designs, questions, and models for policy with a view to building CBD. Through the “Model X Challenge,” they are harnessing the strengths of three different Canadian universities. A roadmap has not been created at this stage.

● the United States of AmericaBanking regulators are currently building a roadmap to achieve greater clarity on crypto assets throughout 2022.

South America

Venezuela In an effort to devalue its currency wracked by chronic hyperinflation, the Bolivar Digital was introduced in October of 2021. This is the second reconversion that has occurred in the country in the past three years.

Brazil It plans to launch a CBD pilot program during 2022, and a completed version is expected sometime in 2024.

Middle east

Israel They decided in 2017 that no digital currency would be issued in the near future, but they have since accelerated their research into the digital shekel, with the goal of creating more efficient payment systems.

the two seas It has plans to launch a digital dinars, however, nothing concrete yet.

Africa

Tanzania It announced its intention to launch its own central bank digital currency. No roadmap has yet been detailed.

Far East and South Pacific

Japan Looking into the possibility of a digital yen, however, any electronic currency should be simple in design and able to coexist with current private sector payments.

CambodiaIts central bank has launched a quasi-CBDC P2P system that is based on the blockchain system, however, it does not use the tokens backed by the central bank. The Bakong project is supported by both the US dollar and the Cambodian riyal.

Palau In the South Pacific, it joined forces with Ripple with the goal of creating a national, government-backed stablecoin. A lot of activity is expected during 2022, however, nothing is certain.

Europe and Asia

Switzerland It has stated that it is ready to launch digital coins in bulk now thanks to System Six Digital Exchange (SDX). However, there is no news about the retail version of the digital currency.

France The authorities have commissioned the Banque de France initiative to examine digital currencies and have now completed a test for the use of digital central bank currencies. Nothing else is known at this time.

TurkeyThe Central Bank of the Central Bank has created a new research platform to look at the digital version of the Turkish lira. After the proof-of-concept phase is completed, the next phase is set to begin with technology stakeholders.

Russia It recently launched its digital ruble pilot program, with the participation of several banks, including VTB, Sberbank, Alfabank and Gazprombank.

India I considered banning the use of cryptocurrencies, although now the government intends to regulate it instead.

In addition to all of these initiatives and projects, there are a number of other jurisdictions looking at this technology. for example,
Indonesia, UK, Pakistan, Iran and New Zealand And more in the consultation stage on a future digital currency.

A few interesting years ago for cryptocurrency

So, as we can see, there is a growing interest and uptake in the world of digital currencies, and it seems that the next few years in this field will be dynamic and pivotal for the future of this concept. One thing is for sure, while there may be some interoperability issues to be overcome in the long run, centralized cryptocurrencies seem like they are here to stay.

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