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Evolution of the Payment System: Boom of Central Bank Digital Currencies (CBDCs)


The Digital Currency Boom of Central Bank Digital Currencies (CBDCs) Worldwide

According to the latest data, 134 countries, accounting for a whopping 98% of the global GDP, are exploring the possibility of introducing digital currencies from their central banks (CBDCs) – a significant increase from just 35 countries in May 2020. This indicates a global trend that includes both developed and emerging economies.

Advanced Exploration Phase of CBDCs

68 countries are in advanced stages of exploring CBDCs, involving developmental, testing, or even implementation phases. Many G20 members are also accelerating work on digital currencies.

Examples from Different Regions of the World

Leading the CBDC experiments is China, conducting the largest pilot tests of its digital yuan (e-CNY), accumulating up to 260 million digital wallets in 25 cities. Meanwhile, the European Central Bank (ECB) plans to introduce digital euro as early as 2025, currently conducting practical tests for functionality and security.

As of now, only the Bahamas, Jamaica, and Nigeria have successfully launched their CBDCs, while the Eastern Caribbean Currency Union faced technical issues with DCash, leading to the suspension of access to this digital currency, and working on a new pilot program.

Global Interest in CBDCs

In addition to China and European countries, nations such as Brazil, Russia, India, South Africa, Saudi Arabia, Iran, and the United Arab Emirates are intensely exploring the possibility of introducing cross-border wholesale CBDCs as an alternative to the US dollar. Following Russia’s invasion of Ukraine, interest in such initiatives has increased, resulting in currently 13 cross-border wholesale CBDCs projects, with mBridge planning expansion into an additional 11 countries later this year.

USA and CBDCs

In contrast to other economic powerhouses, the United States has slowed down work on a retail CBDC, with Federal Reserve Chair Jerome Powell stating that there are currently no plans to introduce such a currency due to privacy concerns.

In conclusion, the growing interest in central bank digital currencies worldwide indicates an evolution of the current payment system and may open up new opportunities and challenges for the global economy in the future.