Bahamas, Jamaica, and Nigeria pioneer CBDC adoption
As 130 economies explore CBDCs, the Bahamas, Jamaica, and Nigeria have fully launched their versions, while G20 nations proceed cautiously.
According to the Atlantic Council Central Bank Digital Currencies (CBDC) Tracker updated on Aug. 16, only three countries have fully launched their CBDCs: the Bahamas, Jamaica, and Nigeria. Eight advanced economies, including China and the UK, have also conducted CBDC pilots.
In a report provided by CoinGecko, emerging nations like the Bahamas and Nigeria are among a handful of nations that have strategically introduced CBDCs to enhance financial inclusivity and digitize their economic landscapes.
The report notes that their economies’ relatively compact size and less intricate financial systems have facilitated quicker adoption rates.
The study also highlighted that the utilization of Nigeria’s E-naira has been modest, with an estimated uptake of merely 6% of the population as of March 2023.
Major economies late in exploring CBDC
On the other hand, larger advanced economies are exhibiting a more cautious approach, driven by apprehensions regarding potential disruptive effects on established banking systems and monetary policies. Countries such as the United States and the United Kingdom are dedicating considerable efforts to in-depth CBDC research before initiating any pilot endeavors, the report notes.
A noteworthy observation, exemplified by the ECCU, is that CBDC adoption extends beyond individual countries. Collaborative CBDC projects between countries or regions are gaining traction, including initiatives like the Stella project involving the European Central Bank, the Federal Reserve, and the Bank of England.
Additionally, efforts like Project Jura, connecting France and Switzerland, and Project Icebreaker, involving Israel, Norway, and Sweden, underline the growing trend of cross-border CBDC ventures.
Amid the current landscape, 130 economies are exploring Central Bank Digital Currencies (CBDCs).
Prior instances of noteworthy CBDC advancements also deserve recognition. Uruguay claimed the distinction of being the first nation to embark on an expansive pilot program for its CBDC in 2017.
Meanwhile, China’s foresight was evident as it took the mantle of the first G20 country to initiate CBDC research as early as 2014. Nevertheless, both Uruguay and China find themselves still entrenched within the pilot phase of CBDC development as of the time of the report.
The research also mentioned that China’s e-CNY, the digital Yuan, is leading the final testing phase among countries trying digital money. Chinese citizens enjoy direct access to the government’s e-CNY app, facilitating seamless yuan exchange for e-CNY at a fixed 1:1 ratio.
Transactions involving this CBDC witnessed remarkable growth, reaching 1.8 trillion yuan by June 2023, a substantial escalation from the 100 billion yuan noted in August 2022.
In addition, several prominent economies are actively engaged in CBDC pilot programs. Among them, South Korea, Japan, and Canada command attention. The Bank of Korea is poised to conduct public testing of its CBDC in the upcoming year.
Meanwhile, Canada’s Project Jasper has collaborated with Singapore’s Project Ubin, jointly exploring cross-border testing strategies.
In contrast, the United States, the European Union (EU), and the United Kingdom (UK) remain engaged in extensive research and strategic evaluation of CBDC potential.
However, the EU’s digital Euro initiative is in its nascent investigative phase, with an anticipated conclusion targeted for October 2023. This ongoing deliberation underscores these economic entities’ cautious and thorough approach toward CBDCs.
US against CBDC adoption
In an interview granted exclusively to Forbes on Aug. 23, Rep. French Hill, a member of the House Financial Services Committee and the Subcommittee on Digital Assets, Financial Technology, and Inclusion, commended the recent strides undertaken by the U.S. Federal Reserve in the direction of modernizing the country’s payment infrastructure with the introduction of FedNow, a payment service provided by the apex bank.
While acknowledging these advancements, Hill remained steadfast in his viewpoint that a clear demarcation must exist between the initiatives associated with FedNow and the ongoing discussions surrounding the potential development of a Central Bank Digital Currency (CBDC).
His belief supports the idea of keeping these projects separate to understand the unique goals and consequences of each one fully.
Hill recently introduced legislation prohibiting the Federal Reserve from issuing a CBDC. The bill, called the Power of the Mint Act, was co-sponsored by Rep. Jake Auchincloss (D-MA).
However, Hill is not the only one who is fighting against CBDCs. Last April, Federal Reserve Governor Michelle W. Bowman clarified her stance, articulating that the perceived risks associated with Central Bank Digital Currencies (CBDCs) surpassed their potential benefits.
Adding to the discourse, Republican congressman Warren Davidson criticized the idea of a digital dollar in July. Davidson characterized CBDCs as tools capable of perverting money into instruments of coercion and control.
Some U.S. politicians agree with Davidson’s concerns about the potential for CBDCs to be programmed in a way that could be used to control and coerce people.
Proponents of CBDCs say it would have advantages like boosting global competitiveness, while skeptics raise concerns about privacy, security, and its impact on the financial system.
In the ongoing narrative, it becomes increasingly apparent that the role of Congress will be decisive in shaping the nation’s digital currency trajectory.
