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What is CBDC? Things you should know

The Central Bank Digital Currency (CBDC) is the digital form of a country’s fiat currency which the central Bank regulates. It is an electronic record or digital token of the official currency, issued and regulated by its monetary authority.

Many central banks are worried that the widespread adoption of these independent cryptocurrencies could weaken their control over the financial system. This could cause financial instability, especially because cryptocurrencies do not have the legal or the regulatory safeguards that central bank money does. So, they decided why not issue a digital currency of their own.

When you ask central banks around the world whether they were exploring CBDC one year ago, the answer was: 80 percent of them were exploring, now it’s nearly 90 percent. Last year, 40 percent were experimenting, and now it’s 60 percent.

The idea of digital money is not new. Many of us use debit and credit cards or payments apps for transactions, but what would make a central bank digital currency different?

Investors of bitcoin believe that because there is a theoretical cap on the number of bitcoins that can ever be mined, the cryptocurrency will become increasingly valuable when central banks have been printing more money than ever before to arrest the economic fallout from the pandemic.

Central Banks across the globe adopting CBDC

Currently, at least 45+ central banks worldwide are publicly researching payments technology and its applications. The likely result is the launch of a CBDC that used distributed ledger, blockchain, or existing fintech solutions. In addition, a 2020 survey among 66 central banks by the BIS found that many central banks around the world are actively developing retail CBDCs.

China’s CBDC: Digital Yuan


China is the major economy that is most advanced in its CBDC development. And was the first country to officially consider its DIgital Yuan.

The People’s Bank of China has been running tests of its digital currency since April 2020 with the help of four banks in the country. Tens of thousands of consumers have already been involved, spending two billion yuan in over four million transactions.

Russia’s CBDC: Digital Ruble


Russia has also launched its CBDC Trial with 12 other banks, including the largest Sberbank, VTB, Gazprombank and Alfa Bank. Earlier this year. Russia’s thinking is not always the same as other central banks, particularly when it comes to the digital ruble. The Central Bank Governor highlighted some noteworthy points during a BIS talk earlier this year.

The European Central Bank: Digital Euro


The European Central Bank also has plans for a digital euro. However, it may be a few years before it is available. The Eurosystem task force has brought together experts from the ECB and 19 national central banks of the euro area, which have identified possible scenarios that would require the issuance of a digital euro. A digital euro would provide citizens free access to a simple, universally accepted, risk-free and trusted means of payment. 

India and Digital Currency: What’s up?


Rumours have been floating for quite a while now that Indian Central Bank is looking at its own digital currency. However, The Reserve Bank of India (RBI) was only studying the idea and hadn’t clarified it yet. The Indian digital currency would lower the economy’s reliance on cash and enable cheaper and smoother international settlements. Also, it’ll protect people from the volatility of private cryptocurrencies.

Bank of Canada and its partnership


The Bank had collaborated with the Monetary Authority of Singapore (MAS) in 2016 on ‘Project Jasper’. The aim was to explore the opportunity of using distributed ledger tech for cross-border transactions.
The Bank has yet to develop any concrete design of Canada’s CBDC and its rollout. Likely, crucial matters like monetary policy and policy rates are not allowing the central Bank to focus on CBDC.

What is Georgia up to?


The National Bank of Georgia (NBG) is taking its digital currency project one step further. The monetary authority is ready to launch the CBDC as early as next year. It aims to use the blockchain-based version of the natural fiar, the Georgian Lari, to enhance retail sales.

Bhutan’s Pilot


Earlier this year, Bhutan’s Central Bank, the Royal Monetary Authority (RMA) collaborated with Ripple, a provider of enterprise blockchain and crypto solutions, to test a Central Bank Digital Currency (CBDC) Private Ledgerto to enable seamless cross-border payments.

Sri Lanka working on framework


Sri Lanka isn’t behind the race of exploring Crypto and Blockchain Technology to digitalize the economy. The Cabinet of Ministers has given the nod to appoint a committee of skilled professionals. They will report on the Acts, Rules, and Regulations required to attract investments of the companies. Which are involved in digital banking, blockchain technology and cryptocurrency mining.

Ukraine’s e-hryvnia project


The National Bank of Ukraine (NBU) is looking to hire a Blockchain and cryptocurrency expert to pilot Ukraine’s digital currency endeavour. This vacancy has been announced as the financial body formulates the e-hryvnia project, the country’s currency. Ukraine chose the famous professional social media platform LinkedIn to deploy its job opening for a blockchain developer.

Bank of England and Britcoin


The Bank of England is looking closely at launching its own CBDC dubbed ‘Britcoin‘. However, it has to make a decision still whether to make one or not. The Bank is seeking a response about a central bank digital currency (more often called CBDCs). Although the Bank hasn’t decided about it yet, they are carefully ‘studying CBDCs.’

Sweden’s E-Krona in top gear


In addition to China and Europe, the Scandinavian nation of Sweden is also quite far ahead of moving to an entirely CBDC-based model e-Krona. Swedish authorities have already started experimenting with their CBDC in select government departments in the form of tokens.

Nigeria to launch eNaira


Nigeria is also about to launch its own CBDC to achieve the same target – reducing the costs of cross-border transactions. The country is said to have teamed up with overseas companies for CBDC design. eNaira, Nigeria’s CBDC, will run on the open-source Hyperledger Fabric blockchain.

Eastern Caribbean Central Bank’s Game Plan


The Caribbean islands, comprising Barbados, Jamaica, Antigua, Barbuda, and others have collectively come up with the ECCB. The CBDC issued by the ECCB is expected to boost the travel and tourism industry of the region. It will allow for simplified payment solutions and a more free-flowing economy in the entire region.

What next for Iran’s crypto journey?


Iran has become a hotbed for the world’s cryptocurrency ecosystem. The country has been able to attract miners from different parts of the world. And is now engaging with this alternative financial model on an increasing scale. The fear of sanctions and of not being able to export its natural resources, oil. This means it will have to come up with a new way to trade without the American dollar.

Bank of International Settlements (BIS) and its insights


BIS worked with seven Central banks and produced three new reports to orient CBDCs towards compatibility and competitiveness necessary for meeting customer needs. Seven Central Banks – Bank of Canada. Bank of England, European Central Bank, Federal Reserve, Swiss National Bank and Central Bank of Sweden and Bank of Japan worked along with BIS on this.

In the above countries, buying, selling, and trading Bitcoins is quite popular. While the legality matters in specific cases, the population depends on credible platforms like trading software to invest in Bitcoins. CBDCs continue to grow in popularity and the year 2021 will be a defining one for them.

Other countries like Turkey and Sweden are not quite far from moving to an entirely CBDC-based model to boost their economies.

CBDCs are in some ways antithetical to cryptocurrencies because they are developed and controlled by a central entity. However, CBDCs have the potential to move the world closer to digital currencies, which can then pave the way for further cryptocurrency adoption.

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