According to an analysis conducted by the Atlantic Council, nearly all major economies are actively exploring the implementation of Central Bank Digital Currencies (CBDCs). This study revealed that 130 nations, accounting for approximately 98% of the global GDP, have expressed interest in CBDCs. While 11 countries, including China, have successfully launched their own CBDCs, another 95 countries have joined the race in the past three years. Notably, developed economies such as Japan, South Korea, Australia, and the UK are among those actively participating in CBDC development.
Currently, 46 countries are in the research phase, while 21 have initiated pilot tests. The Atlantic Council highlights the significant progress made by almost every G20 country in the past six months, indicating the growing importance of CBDCs on the global economic stage. China, Nigeria, the Bahamas, Jamaica, and other Caribbean islands are leading the pack in terms of determination to issue a digital version of their official currencies.
China, in particular, has taken numerous initiatives to promote the adoption of the digital yuan. Major cities like Shenzhen, Jinan, and Lianyungan organized various activities during this year’s Spring Festival to encourage the use of CBDCs. Furthermore, digital yuan payments were allowed during the 2022 Winter Olympic Games held in Beijing.
Global Progress and Considerations
While the United States has experienced a stall in the progress of retail CBDCs, the development of wholesale CBDCs (bank-to-bank) has advanced. This shift in focus can be attributed to geopolitical factors, such as Russia’s invasion of Ukraine and the subsequent G7 sanctions response. As a result, wholesale CBDC developments have doubled, according to the Atlantic Council’s research.
Other major economies, including Japan and the United Kingdom, are currently in the prototype development phase. They are also considering consulting the public before officially launching their CBDCs. The European Central Bank has expressed its intention to introduce a digital euro, describing it as an alternative payment solution for online and offline trading. Similarly, Brazil and India have plans to launch their CBDCs next year, with Banco Central do Brasil authorizing Mercado Bitcoin, Sinqia, Genial, and other financial institutions to participate in the project.
The motivation behind central banks’ pursuit of CBDCs varies. The Atlantic Council suggests that CBDCs could promote financial inclusion by providing access to money for the unbanked population, introduce competition in local monetary markets, enhance settlement efficiency, and reduce transaction fees. However, it is important to note that CBDCs differ significantly from cryptocurrencies. Unlike decentralized cryptocurrencies, CBDCs are issued and controlled by central banks, which raises concerns about privacy and surveillance. Critics, including Florida Governor Ron DeSantis and US presidential candidate Robert F. Kennedy, argue that CBDCs could potentially be used as tools of oppression.
The global trend towards CBDCs is undeniably gaining momentum, with the majority of countries actively exploring their implementation. The motivations behind developing CBDCs vary, ranging from financial inclusion to increased efficiency in monetary systems. However, concerns about privacy and control have been raised, emphasizing the need for careful consideration and public consultation. As the world moves closer to the digitalization of currencies, the impact of CBDCs on the global financial landscape remains to be seen.