YEREVAN (CoinChapter.com) – Despite the market downturn in 2022, the Central Bank Digital Currency (CBDC) projects around the world did not hibernate, albeit moved along at a slower pace. However, a flurry of tests near the end of 2022 suggests CBDC initiatives are doubling down as lawmakers strive for more control over the digital assets segment.
Thus, it pays to take a closer look at CBDCs and their possible impact on digital sector users. But first, here is a quick recap.
What are CBDCs, and why are they attractive to Central Banks globally?
Central Bank Digital Currencies, as evident from the name, are digital forms of fiat currencies. They are introduced, launched, and controlled by the Central Bank. Thus, CBDCs present a segway into the domain of digital assets without giving up governmental control.
The attraction for Central Banks also became quite clear as the digital sector grew to $3 trillion in 2021. Gilbert Verdian, founder and CEO of Quant, a London-based blockchain firm, has a different outlook, seeing CBDCs as a possibility rather than a threat.
A well-designed CBDC can help provide a real-time view of risks and currency outflows to help implement specific and targeted measures to prevent financial contagions from spreading further in the event of a crisis.
According to an online CBDC tracker, 119 countries are currently investigating the subject, which makes 38 more than in early 2022. Out of that 119 countries, 11 have fully launched government-owned digital currencies.
The crypto-friendly Bahamas are in the lead, followed by neighbor islands (St Kitts and Nevis, Antigua and Barbuda, St Lucia, and Grenada). In 2022, Nigeria joined the pack, as well as Jamaica and more islands in Eastern Caribbean.
In addition, several countries are already launching pilots. China, Sweden, Ukraine, Russia, Singapore, Saudi Arabia, and others have advanced to practical implementation.
G7 joins in
The US and the UK jumped on the bandwagon in 2023, making progress in CBDC development. Federal Reserve’s innovation center has partnered with the Monetary Authority of Singapore to determine how wholesale central bank digital currencies can improve cross-border payments.
The US government has also unfolded another project with the participation of the New York Fed. The proof-of-concept test will determine the feasibility of digital currencies operating in a network of financial institutions. Several US financial giants joined in, including BNY Mellon, Citigroup, PNC, TD Bank, Truist, US Bank, and Wells Fargo.
While the US categorizes the aforementioned research as experimental, British lawmakers moved closer to actually launching a CBDC. The UK prime minister Rishi Sunak has favored CBDCs for several months, seeing the Digital GBP as a “part of the wider story of digital innovation.”
The Bank of England recruited developers in December to build a digital wallet for a potential government-owned digital currency. Reportedly, the UK researchers will also develop a mobile app, website, and server that can connect to an application programming interface.
Meanwhile, Swiss National Bank said the country does not need CBDCs just yet, despite prior developments.
The crypto sector is not thrilled.
As mentioned earlier, Quant’s Verdian has a positive take on CBDCs, seeing it as a possibility to give blockchain technology a wider outreach.
A digital pound enables consumers and businesses to automate complex and cumbersome processes and implement logic into money. It offers new efficiencies and faster workflows to better meet our needs as our living experience becomes increasingly digital.
added the executive.
However, not everyone in the blockchain domain has a starry-eyed outlook on CBDCs. For example, a crypto influencer under the pseudonym Crypto Tea called UK PM’s readiness to digitalize the GBP an “evil plan.”
The fiat system is modern day slavery if you work for money that they create out of thin air… you are a slave. but if that’s the case, why would anyone want to use central bank digital currencies? I’ll explain how they will force you to adopt it
Crypto Tea also commented on the possibly enforced use of CBDCs, even if it is a less convenient option for users than stablecoins. For example, the Chinese government chose to “catch more flies with honey” in 2020. They offered $40 million in digital Yuan to Chinese residents to boost early CBDC adoption.
However, the CATO institute reported that the Nigerian authorities weren’t as “lenient” and restricted cash usage instead.
Faced with dismal adoption rates of its central bank digital currency (CBDC), the Central Bank of Nigeria has restricted cash withdrawals to push citizens into using its CBDC.
read the release.
However, estimates suggest less than 0.5% of Nigerians are using the CBDC. Instead, over 50% of Nigerians use cryptocurrency, which they see as a more powerful option.
“CBDC doesn’t solve any problems,” says official
Moreover, the President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, agrees with the grim prospects. He commented that the main reason to develop those is increased “monitoring,” as CBDCs seem to not have any other use case.
I’m pretty skeptical. I keep asking anybody at the Fed and outside of the Fed to explain to me what problem this is solving. All I get is a bunch of handwaving. Is there any evidence that it is [better]? I can see why China would do it.
said the executive.
Half of the crypto community is investing in scams that promote CBDCs grown men are cheering for CBDCs hoping to make a few dollars at the cost of enslaving their children they say buzzwords like “interoperability” and “bridge currency” without knowing what they mean.
CoinChapter reached out to the influencer for further comments on the matter and the possibility of conducting a poll on the subject among their 90,000 followers. The article will be updated to include the results.
Lilit is a Yerevan-based Markets writer, skilled in 3 languages, and interested in writing about the tech world, trading, art, and science. She also has a background in psychology and marketing, which helps deliver the right message to the target audience.