- CBDCs are gaining significant traction as more countries are seeking to create digital versions of their fiat currencies.
- China’s digital yuan and the Bahamian Sand Dollar are among the leaders in the new wave of CBDCs sweeping through the financial ecosystem.
- The US seems set to be one of the next nations to create its digital currency but has stated that it is in no rush to launch a digital dollar.
- At the moment, several US digital dollar pilots, largely steered by private enterprises, are experimenting with CBDCs.
Central bank digital currencies are buzzing right now as governments around the world try to play catch up with the burgeoning industry of cryptocurrencies. Since cryptocurrencies are largely decentralized, central banks do not wield sufficient power over the regulation of these digital tokens, which has spawned the recent drive for the creation of digital versions of fiat currencies.
America Next In Line?
With over 60 countries engrossed in the development of CBDCs, the spotlight has been on the US as the global financial leader. With China already in the final stages of the launch of the digital yuan, there is a seemingly mounting pressure on the US to create its own CBDC to counteract the widening influence of China’s digital currency.
However, Christopher Giancarlo, a former chairman of the US Commodity Futures Trading Commission, noted that there is no requirement for the US to rush in the creation of a CBDC. Instead, he argued there is a need to “set standards for the digital future of money.” He made these comments at the unveiling of the collaboration between the Digital Dollar Project and Accenture.
In keeping with the principle of laying a proper foundation for the launch of an American CBDC, Giancarlo noted that in-depth research will be carried out to properly balance the issues of “privacy rights, financial inclusion, and the rule of law.”
On this note, five US CBDC pilot programs are scheduled to be launched to find the best path to adopt in the development of central bank digital tokens. These programs are going to be complementary to the joint research undertaken by the Federal Reserve Bank and the Massachusetts Institute of Technology.
On the Flipside
- A major challenge with CBDCs is the issue of privacy concerns.
- These concerns came to light in a recent European Central Bank CBDC survey for the development of the digital euro.
- Another major concern is the centralization of CBDCs, which contrasts with the decentralized nature of the crypto industry.
CBDCs Around The World
Around the world, CBDCs are garnering a significant buzz, with several nations intensifying efforts to develop their digital currencies. According to a report by PwC, the Bahamian Sand Dollar ranks first amongst CBDCs, while the widely anticipated Chinese digital yuan ranks in third place.
Cambodia’s Project Bakong takes second place because it has gone live with a decent degree of success. Ukraine, Uruguay, and Ecuador are other high-ranking nations in the report as they seek to achieve financial inclusion across all demographics as the world inexorably marches into the digital age.
China’s digital yuan has already undergone several pilot programs, with the wide-scale test billed for the 2022 Beijing Winter Olympics. Chinese officials have stated that the digital yuan has no intention to topple the dollar.