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The Global Landscape of Central Bank Digital Currencies
- 80% of the surveyed global central banks were engaged in a certain level of CBDC development, with 10% will launch CBDC in the next three years, according to BIS.
- The central bank of the Netherlands released a 45-page report saying that they want “a leading role” with digital euro.
- The US Fed has taken a more proactive approach with the study of the potential of launching its digital currency.
Sooner than you think
The era of spending digital currency instead of paper may arrive sooner than we thought. A study from the Bank for International Settlements shows that 80% of the global central banks were actively looking at CBDC in 2019, that’s 10% more from YoY. 30% of the surveyed 66 countries said they already have plans to issue some form of digital currency. Also, 20% of them said that they would possibly release their CBDC to the general public by 2026.
Though the percentage may not look significant, that is already covering one-fifth of the world’s population, and they may have access to CBDC in the foreseeable future.
BIS believed that even though CBDC is centralized, it still has more prominent potential to spread globally compared to cryptocurrency and stablecoin.
The global CBDC race
Countries worldwide have accelerated their pace of developing CBDC this year. On January 23, the World Economic Forum debuted its comprehensive CBDC framework to the world, covering retail, wholesale, cross-border CBDC, and alternatives in private money such as “hybrid CBDC.” The plan aims to act as a beacon and provides “comprehensive and risk-aware” information to policymakers to help them decide whether to issue CBDC.
Just this week, the central bank of the Netherlands revealed its positive stance on launching CBDC. They believe that Dutch citizens will gain tremendous benefits from this project. DNB also said that they are ready to play a leading role when it comes to issuing CBDC.
It is also worth mentioning that some countries have teamed up to develop CBDC. On January 21, 2020, the BIS, alongside central banks, including the BoC, the BoE, the BoJ, the ECB, the Riksbank, and the SNB, published a joint announcement, saying that they will form a central bank group to explore the application scenarios for CBDC. The bloc aims to design a CBDC that fits their economic needs, while it is functional and technical advanced, also available for cross-border usage. The group will work with the Financial Stability Board and the Committee on Payments and Market Infrastructures to start promoting a tiered CBDC.
The Riksbank also revealed its e-Krona project is underway, and it is already in the testing stage. The assessment is expected to finish by February 2021. Reportedly, the test is included an e-krona mobile wallet, with functions like making payment, deposit, and withdrawal. As a country with 80% of its people uses a card to pay purchases, Sweden has long been dedicated to the race to become the world’s first almost cashless society.
Of course, China has been a leading player in the CBDC space. In our previous publication <Five Facts You Need to Know About DCEP>, we pointed out that China may soon become the first country in the world to launch its CBDC. The COVID pandemic may have been one of the reasons why China was stepping up its effort in the digital currency area.
In light of China’s move, the US seems to start to take a more proactive approach in this area. Although the Fed has been well-known for against Facebook-backed Libra, Fed’s Brainard recently said, that the Fed has been “conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC.”
This shift of stance is considered the US’s response to the criticism in the past few months for acting too slow on CBDC development.
Japan has been catching up fast as well. The country announced that it would launch its digital yen in “two to three” years. Japan’s regulatory bodies, including the Ministry of Finance, Financial Services Agency, and BoJ have started to work together on the research of promoting CBDC.
While the digital currency race has never been this heated before, some countries are still saying no to a state-backed digital currency. However, given the steadily increasing amount of countries that have embraced the notion, a CBDC era might arrive sooner than we expected.