Central Bank Digital Currencies: A Global Overview
The Launch of CBDCs in the Bahamas, Jamaica, and Nigeria
In the world of finance, central bank digital currencies (CBDCs) have become a hot topic. While 130 economies are exploring CBDCs, the Bahamas, Jamaica, and Nigeria have fully launched their own CBDCs. These countries have strategically introduced digital currencies to their central banks to promote financial inclusiveness and the digitization of their economies. The relatively compact size and less complex financial systems of these economies have facilitated faster adoption rates. However, the benefits of Nigeria’s electronic currency have been modest, with only an estimated intake of 6% of the population as of March 2023.
Major Economies Lagging Behind in CBDC Exploration
In contrast, major developed economies such as the United States and the United Kingdom are proceeding cautiously with CBDC exploration. Concerns about potentially disruptive effects on existing banking systems and monetary policies have driven a more cautious approach. However, collaborative CBDC projects between countries, such as the Stella project involving the European Central Bank, the Federal Reserve, and the Bank of England, are gaining attention. Cross-border CBDC projects, including the Jura project connecting France and Switzerland and the icebreaker project involving Israel, Norway, and Sweden, confirm the growing trend of international cooperation.
The Landscape of CBDC Exploration
Currently, 130 economies are exploring the concept of central bank digital currencies. Previous cases of CBDC developments have also made significant strides. Uruguay was the first nation to initiate an expanded pilot program for its CBDC in 2017. China, on the other hand, began its CBDC research as early as 2014. However, both countries are still in the pilot project phase of CBD development. China’s digital yuan, also known as e-CNY, is currently in the final testing phase, with Chinese citizens enjoying direct access to the government’s e-CNY app for seamless yuan exchange.
CBDC Pilot Programs and Ongoing Deliberations
Several prominent economies, including South Korea, Japan, and Canada, are actively participating in CBDC pilot programs. The Bank of Korea plans to conduct public tests of their CBDC in the next year. Additionally, the Canadian Jasper Project and the Singapore-based Ubin project are jointly exploring cross-border testing strategies. The European Union, the United States, and the United Kingdom remain engaged in extensive research and strategic evaluation of CBDC potential. The European Union’s digital euro initiative is currently in its emerging investigations phase, with an expected outcome targeted for October 2023.
The Debate on CBDC Adoption
While CBDCs have their supporters, there are also those who oppose their adoption. Representative French Hill, a member of the House Financial Services Committee, believes that initiatives like FedNow, the US Federal Reserve’s payment service, should be kept separate from the ongoing discussions surrounding CBDC development. Hill recently introduced legislation to prohibit the Federal Reserve from issuing CBDCs. Other politicians, such as Federal Reserve Governor Michele W. Bowman and Congressman Warren Davidson, have expressed concerns about the potential risks and misuse of CBDCs. The debate on CBDCs continues, with supporters emphasizing their potential benefits and skeptics raising concerns about privacy, security, and the impact on the financial system.
The Role of Congress in Shaping the Digital Currency Path
As the narrative around CBDCs unfolds, it becomes increasingly clear that the role of Congress will be decisive in shaping the path of digital currencies in the nation. The ongoing deliberations and legislative actions will determine the future of CBDC adoption and regulation.
