CBDC: Which Countries Are Using, Launching or Testing Their Own Digital Currencies

As cryptocurrencies and other digital payment solutions become more popular,  central banks are increasingly showing interest in developing ...

As cryptocurrencies and other digital payment solutions become more popular,  central banks are increasingly showing interest in developing their own response to these technologies in the form of central bank digital currencies (CBDCs). Central bank digital currencies are digital variants of national currencies controlled by central banks. But just how widespread interests in CBDCs?

According to the IMF, nearly 110 countries are actively considering central bank digital currencies (CBDCs), and some have already started rolling them out. Let's take a closer look at a few proposed CBDCs.

Countries where CBDCs have been launched

Bahamas

The Sand Dollar was issued by the Central Bank of the Bahamas in October 2020. It was the first nationwide CBDC in the world. In the Bahamas, part of the population cannot access financial services because it is unprofitable for commercial entities to operate in all areas, partly due to the geography of the country, divided into many islands.

As a result, an estimated 20 percent of the population does not have a bank account. It is hoped that the Sand Dollar can help improve financial inclusion and strengthen protection against money laundering and illicit economic activity. CBDC users are required to go through the Know Your Customer  (KYC) and  Anti-Money Laundering (AML) compliance processes.

Nigeria

Nigeria became the first African country to launch a CBDC last October. eNaira is stored in a digital wallet and can be used for contactless payments in stores, as well as for transferring money. By the end of January 2021, almost 700,000 users had downloaded the eNaira wallet.

The population of Nigeria is about 219 million people. According to the Nigerian media outlet Stears Business, 90% of Nigerians have mobile phones, but only 10-20% use smartphones, which are required to use eNaira. To access eNaira, the user must also have a National Identification Number (NIN).

Eastern Caribbean Monetary Union

Countries in the Eastern Caribbean Union have created their own form of digital currency designed to speed up transactions and serve people without bank accounts.

Seven participating countries:

  • Antigua and Barbuda,

  • Dominica,

  • Grenada,

  • Montserrat,

  • Saint Kitts and Nevis,

  • Saint Lucia,

  • Saint Vincent and the Grenadines.

Anguilla was the only country in the union to opt-out.

The Eastern Caribbean Central Bank has said that "DCash" is the first blockchain-based currency introduced by any of the world's currency unions. The system allows users even without bank accounts, but with a smartphone, to use the application to make payments using a QR code. Those without bank accounts can go to a previously approved agent or non-bank financial institution who will verify the person's information and then approve or not the DCash wallet.

Countries that are testing CBDC in pilot projects

China

China became the first major economy in the world to trial a digital currency in April 2020. The People's Bank of China aims for the widespread use of the e-CNY, or digital yuan, domestically in 2022 as well. According to the IMF, it currently has over one hundred million individual users and billions of yuan worth of transactions!

The country is currently providing RMB digital payment services to visitors to the Beijing Winter Olympics. Guests can download the RMB digital wallet app or store money on a physical card.

Sweden

In 2017, Sweden's Riksbank began piloting a CBDC called e-krona due to a decline in the use of cash in retail payments. In 2010 approximately 40% of payments in Sweden were made in cash, but by 2016 this number had fallen to 15%. The Riksbank has suggested that DLT (blockchain) could be the basis for a future e-krona and began testing it on the R3 Corda platform in partnership with Accenture in 2020.

One of the key goals of the project is to provide wide user access to the electronic krone in the future. The state wants to protect the elderly and people with disabilities and make sure that a cashless society does not adversely affect them.

Jamaica

Jamaican Prime Minister Andrew Holness has confirmed that the Bank of Jamaica will issue a digital Jamaican dollar by the end of the first quarter of 2022, following a successful pilot last year. As part of the test project, a digital currency was minted in the amount of 1.28 million euros. Fifty-seven clients had peer-to-peer transactions, cash deposits, and withdrawals, including transactions with small businesses such as a local jewelry store, for example.

European Union

The European Central Bank (ECB) announced last July that it was actively exploring the possibility of creating a digital version of the euro.

“Our work is to ensure that, in the digital age, citizens and firms continue to have access to the most secure form of money – central bank money,” Christine Lagarde, President of the ECB, said at the time.

As the custodian of the currency, the ECB is keeping a close eye on the rise of decentralized cryptocurrencies like Bitcoin as the COVID-19 pandemic accelerates the move away from cash. The European Commission announced recently that a digital euro bill will be proposed in 2023. In the meantime, the ECB will continue to work on developing its CBDC.

Ukraine

The National Bank of Ukraine has been studying the possibility of issuing a national digital currency since 2016. In 2018, a pilot project was carried out to issue it for retail payments on the blockchain platform. It provided for issuing a limited amount of e-hryvnia into circulation and testing operations with its use by employees of the National Bank and companies participating in the project.

However, given that the pilot project had a limited list of transactions and a range of users, as well as a small number and volume of transactions, it did not make it possible to fully assess the attractiveness and potential level of involvement of the Ukrainian population in such a tool.

Other CBDCs

Limited-use CBDCs have also been proposed to streamline critical financial infrastructure services such as interbank payments and settlement processes rather than for general use. The Monetary Authority of Singapore  (MAS) Ubin is an example of such a project and was launched in 2016 to explore the application of DLT for clearing and settling payments and securities across the interbank network. MAS has partnered with JP Morgan and Singapore-based investment firm Temasek to test the technology in more than 40 companies.

In addition to the above projects, South Korea, Japan, the UK, Canada, and other countries are also considering launching their central bank digital currencies. While the U.S. has no plans for a CBDC yet, the Federal Reserve has said it is exploring opportunities to digitize the dollar in the future.

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Rex Mars: CBDC: Which Countries Are Using, Launching or Testing Their Own Digital Currencies
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