114 countries are working on CBDC
2 min readGlobal CBDC development picked up speed significantly during the corona pandemic. According to a recent report According to the US think tank “Atlantic Council”, 114 countries are currently dealing with digital central bank money – an increase of 280 percent compared to May 2020. At that time “only” 30 countries were dealing with the topic of CBDC.
The report states that 46 percent of countries are now at least in a test or development phase. Only in Ecuador and Senegal have projects for their own digital central bank currency been shelved. In general, the People’s Republic of China is considered a pioneer in CBDC development. Beijing is currently testing the digital renminbi (e-RMB) on almost 260 million people. In addition, CBDCs are already in use in eleven countries – primarily in Caribbean countries such as the Bahamas and Jamaica.
And also in Nigeria. The largest economy in Africa introduced the e-Naira in October 2021 – with modest demand. Only 0.5 percent are said to have used the digital currency so far. The central bank reacted and restricted cash withdrawals from ATMs from January 9th.
“G7 in development phase”
And the seven economically strongest industrial nations are also working on the “money of the future”. The Federal Reserve launched a wholesale experiment in November last year. The European Union commissioned Amazon, among others, to develop a prototype for a digital euro. In addition, nearly every G20 country has made “significant progress” over the past six months, according to the Atlantic Council report.
CBDC: opportunity or scourge?
The advantages of digital central bank currencies are obvious. They can simplify cross-border payments and generally drive the inclusion of citizens from regions with weak financial infrastructure. Nevertheless, the Atlantic Council sees various challenges associated with a broad rollout of central bank digital currencies.
On the one hand, there is a risk of cyber attacks on the monetary system. Second, high consumer demand could trigger a run on banks, affecting their lending and shocking interest rates.
Furthermore, the experts at the US think tank see the emergence of various CBDCs also having an impact on the overall geopolitical power imbalance. This would make it easier to circumvent sanctions – example: Russia. Since the beginning of the war, the Federation has been working flat out to introduce a digital ruble. In 2024 it should be ready.
Last but not least, the issue of privacy is inextricably linked to CBDCs. Proponents, on the other hand, argue that central bank digital currencies and privacy can be reconciled. However, a practical solution has not yet been found. Despite all the innovation, a stale aftertaste remains.
