The rise in popularity of crypto-assets and less widespread use of cash is expediting the move towards the digital economy. Even the conservatives are starting to realize a centralized digital currency can be more cost-efficient and help unbanked get easier and safer access to money.
When the pandemic hit, we saw a narrative of negative messaging around cash and its daily usage. Some reports even predicted a 15-20 percent decline in cash payments. This resulted in many governments taking a hard look at centralized digital currencies.
Over the years, we have seen very few countries take an interest in exploring virtual currencies, and practically no one was ready for implementation. But that has now changed significantly. We are now having specially engineered trackers for getting an overview of the global adoption of digital currency.
The state-of-the-art CBDC tracker revealed some interesting findings of countries taking a deeper look at digital currencies. The interactive database launched by the GeoEconomics centre featured 81 countries making an effort in adopting a central bank currency. These countries represent over 90% of the economy on a global scale. If we compare these stats to an original report published in 2020, we only had 35 countries actively exploring CBDCs.
Source- Atlantic Council
A year ago, we saw The Bahamas launch the “Sand Dollar” and distribute it with the help of authorised financial institutions. It was the first country to issue a CBDC, but right now, we have so many countries that are already in the research and pilot implementation stage.
A few days back, we got the news that China’s CBDC plans are ready to expand internationally. The digital Yuan is ‘technically ready’ for cross-border use, making China the leading country in CDBC development. The Bank of China also recently announced that the transactional value between 24 million (personal & corporate) wallets is around $5.39 billion.
The database also revealed that the United States of America is lagging behind Europe, Japan, and England in major aspects of CBDC development. There has been slow progress in the US, as the Dollar is the most widely referenced asset in the border finance ecosystem and many government officials feel CDBC integration should be dealt with caution. We can expect to see major developments being made to achieve digital dollars, as China is beating the US when it comes to online money.
Another key finding shows that five countries have now officially launched their own digital currencies, but the Bahamas is the only one currently having wide distribution. Even Russia is planning to draft regulatory norms once the development of their desired hybrid platform is complete. The Bank of Russia looks forward to decreasing its dependence on the US dollar by using centralized digital currencies.
According to the tracker, we now have 14 countries in the pilot phase, 16 in development, and 32 in research. Although we are moving in the right direction, we need to see more international coordination and regulations surrounding digital currencies. For example, in India, we are still seeing officials balance pros and cons for implementation. Many of them are still worried if digital money like cryptocurrencies and CBDCs can disintermediate monetary systems and put traditional banking systems in danger.
The digital currency movement will slowly but surely attract many more countries to adopt a Central backed digital currency. The main challenges would always be user adoption and security. If governments adopt the technology and find a way to regulate digital payment flows, we can expect more competition in the coming years.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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