In 2020-2021, the cryptocurrency market skyrocketed, causing governments to pay more attention to cryptocurrencies and blockchain projects. It doesn’t apply only to the regulation of the crypto market but also to how to adapt cryptocurrencies to fit government needs. For example, in June 2021, El Salvador became the world-first country to make Bitcoin a legal tender. Such a move inspired Paraguay, Argentina, Brazil, and a number of other Latin American countries to consider and follow such an opportunity as well.
Moreover, at least 56 countries think about creating their own central bank digital currency (CBDC). Reasons for issuing a CBDC differ significantly from country to country. For some, this is a logical step because of declining cash usage, while for others, it is an opportunity to combat inflation, avoid sanctions, or just a desire to keep up with other central banks.
Over the past year, CBDC research has accelerated in countries that did not previously take a firm stance on such initiatives. And the recent news that central bank digital currencies will get full BIS backing could accelerate this process further.
Here is how the current CBDC world map looks like and what stages the various countries are in.
Countries with launched CBDC
At the moment, there is only one country with already launched CBDC, and it’s the Bahamas. Bahamas’ Sand Dollar was announced in 2017 and was created to modernize and optimize the country’s financial system. Bahamas’ CBDC is backed 1:1 to the national currency. Following a successful pilot stage in 2019, the project was officially launched in October 2020.
In April 2021, the governor of the Central Bank of Bahamas emphasized that a key purpose of the Sand Dollar is to make payments accessible, especially in hurricane-prone areas, as bank branches there could take months to rebuild. Sand Dollar users must go through standard bank-grade Know Your Customer (KYC) procedures for using mobile wallets and KYC level affects transaction limits in CBDC.
In May 2021, the Bahamas Automated Clearing House (ACH) was integrated with mobile wallets to make Sand Dollar transfers between bank accounts and wallets in both directions. Although many organizations in the Bahamas have already started using CBDC, and Mastercard has even issued a prepaid card for Sand Dollar, the project is still considered under active development.
Countries with pilot CBDC projects
Many countries are also close to launching CBDC but they are still making a series of trials to explore the feasibility and relevance of the project. One of the most active in this regard is the People’s Bank of China. In early 2021, lotteries began to be held in some Chinese cities to test the e-yuan and how the winners would use it. Recently, China’s CBDC trials reached the Beijing subway to test the potential mass consumer base.
But China isn’t the only major economy to test its CBDC. In 2020, the European Central Bank released a digital euro report detailing how it could support current goals by providing citizens with access to a secure form of digital money.
In April 2020, South Korea’s central bank announced the launch of a pilot program for technological and legal analysis of the CBDC issuance. The pilot program should last until the end of 2021. In Lebanon, the CBDC is expected to launch by the end of 2021, while Sweden recently extended a pilot stage to February 2022.
Other countries that provide CBDC trials or plan to launch it soon include Bahrain, Bermuda, Japan, Singapore, South Africa, Ukraine, and Uruguay.
Countries that develop and research CBDC
Most of the countries which announced CBDC plans are at this stage. Fairly active development of the CBDC idea is seen in Brazil. Although such projects recently started studying there, central bank officials are already expecting the CBDC launch by 2023.
In Turkey, the central bank began to research CBDC in 2018, expecting that an economic crisis is near. According to local authorities, the introduction of Digital Lira should bolster the country’s economy.
In February 2021, the US Fed released a report about preconditions of creating CBDC. This report detailed that the next step would be engaging the public, authorities, and business to discuss the purpose and opportunities of CBDC issuance in the US.
According to Statista Global Consumer Survey, 6% of US respondents shared that they used or own cryptocurrencies, meaning that cryptocurrencies are quite popular in the USA. And in 2020-2021, the number of people who started looking for where to buy bitcoin in the USA has grown exponentially due to the pandemic and stimulus packages from the government. Some experts expect that the CBDC development in the United States might accelerate research on this initiative in other countries.
In Kazakhstan, the Netherlands, and Spain, CBDC is mentioned in national plans for digital technologies development. Among other countries that have shown interest in CBDC can be mentioned Canada, Chile, Israel, Morocco, Norway, Russia, Switzerland, and Caribbean countries.
Countries that have abandoned the CBDC idea
The Ecuadorian government announced the launch of dinero electrónico (DE) in 2014, and by February 2015 DE was already acting as a means of payment. But most of the citizens did not want to accept the new currency due to mistrust of the government, causing the project to be canceled.
In Denmark, CBDC viability was explored in 2016-2017. In 2017, the country’s central bank stated that introducing e-kroner would be ineffective compared to Denmark’s existing payment infrastructure.
Speaking of recent statements, in October 2020, the assistant governor at the Reserve Bank of New Zealand said that the country has “no imminent plans” to launch a CBDC.