A recent assessment by the Atlantic Council revealed an interesting trend in the growing global interest in central bank digital currencies (CBDCs). The study found that CBDCs are gaining traction as a new frontier in economic digitalization. Among these countries, 11 have led this financial revolution by fully launching CBDCs, with China in the lead.
Three-year overview: the escalating digital currency race
The study estimates that 95 countries have joined the CBDC race in the past three years, indicating that global interest in these digital currencies is accelerating. Currently, 130 countries have launched various initiatives in this field, including major developed economies such as Japan, South Korea, Australia, and the United Kingdom.
Interestingly, most countries (46) are at the research stage of this journey, while 21 have already initiated pilot testing.
Six-month progress report: G20 countries and CBDCs
Almost all G20 countries have made significant progress in the past six months. The Atlantic Council report highlights the new resources and substantial progress of these CBDC projects.
Some countries are showing a strong desire to digitize their official currencies. These countries include China, Nigeria, the Bahamas, Jamaica, and Caribbean islands.
China, in particular, has made significant progress in promoting the digital yuan, with initiatives such as including digital yuan payments during the 2022 Winter Olympics in Beijing.
However, in contrast, the study noted that the development of retail CBDCs in the United States has stagnated. But at the same time, the country has made progress in developing wholesale, bank-to-bank CBDCs. Interestingly, geopolitical events such as Russia’s invasion of Ukraine and subsequent G7 sanctions reportedly spurred the development of wholesale CBDCs.
Prototypes that keep popping up around the world
Leading economies such as Japan and the United Kingdom are pushing the boundaries, developing CBDC prototypes and considering public consultations on potential CBDC launches.
Likewise, the ECB hinted at launching a digital euro, and the European Commission revealed more about the project, portraying it as a broad payment solution for both online and offline transactions.
Brazil and India plan to launch their own CBDCs in the coming year, and financial organizations such as Mercado Bitcoin, Sinqia and Genial are also involved in the Brazilian project.
Motivations behind CBDC
Despite different motivations, the Atlantic Council speculates that CBDCs could encourage financial inclusion, provide monetary access to the unbanked, stimulate competition in domestic money markets, improve settlement efficiency, and minimize transaction fees.
Compared to cryptocurrencies, CBDCs are centrally issued and regulated, posing a potential threat to personal privacy. Prominent figures such as Florida Governor Ron DeSantis and U.S. presidential candidate Robert F. Kennedy have expressed these concerns, describing CBDCs as a potential tool for surveillance and oppression.
