Year of CBDC. Let the race begin for a better world
Central bank digital currencies (CBDC) are currently a hot topic in finance, economics and technology space. As per Bank for International Settlements (BIS), 80% of world wide central banks are engaged in CBDC research from the beginning of this year.
This article is an effort to explain what is CBDC in leman terms, Why its difference than crypto currency and raising in blockchain world? What problem it going to solve? Who are the CBDC pioneers, basically the countries who officially working or testing retail Central Bank Digital Currency?
What is CBDC ?
Central bank digital currency (CBDC, also called digital fiat currency or digital base money) is the digital form of fiat money
The present concept of CBDCs was directly inspired by Bitcoin, but CBDC is different from cryptocurrency. Unlike cryptocurrency, CBDC is only issued by the states, government or central banks. https://en.wikipedia.org/wiki/Central_bank_digital_currency
Reasons for rising of CBDC in blockchain world
- Cryptocurrencies are not succeeding as they promised and supposed to be
- Anonymous access and transactions.
- Most of the cryptos are not scalable, cheap, secure or 100% decentralise
- Rise of scams, exchange hacking, lack of trust
What problems CBDC going to solve ?
- Cash transaction is a scam. They have no traceability or records. Government loosing lot of tax. Most of the developing countries, only less than 10% population paying tax. Most cash transactions are not taxable or misused.
https://www.cnbc.com/2016/05/03/guess-how-many-people-pay-taxes-in-india.html - Huge cost of printing money- The more it worths the more it costs to produce. Apart from printing cost it includes, currency transportation in case of vast territory or very remote area including small islands , the currency quality assurance etc.
3. Direct engagement between Government and people. People, agencies can get subsidies and financial incentives directly to their wallets without relying on the intermediaries traditional approach, on a reduced cost and timeframe. It enables access of money during Covid 19. Due to current Pandemic, travelling, visiting Banks, Queing at ATM is not recommended and kind of dangerous. CBDC is a money channel to common man.
But don’t digital currencies already exist?
There are already thousands of such virtual currencies which we called cryptocurrencies, but they are not from the government or from any central banks. Anyone can build and manage cryptocurrency anonymously. Cryptocurrencies run on distributed-ledger technology, meaning that multiple devices all over the world are constantly verifying transactions.
Fiat Vs Cryptocurrency Vs CBDC
Which Countries are leading on CBDC projects ?
China DC/EP —
DCEP (Digital Currency Electronic Payment, DC/EP) is a currency created and sanctioned by the Chinese Government. Its China’s national digital currency and claimed to be become the world’s first Central Bank Digital Currency (CBDC) as it is issued by state bank People’s Bank of China (PBoC). The goal and objectives of this is to become a global currency like the US Dollar. Currently this project is on testing phase and being tested on private and public sectors but China won’t launch its own digital yuan initiative until the Beijing Winter Olympics in 2022.
Sweden: e-krona
The Riksbank is conducting a pilot project with Accenture to develop e-Krona which will be used by general public for cashless transactions. Its intend to make instant payment using mobile phones, wearables, cards anytime. https://www.riksbank.se/en-gb/press-and-published/notices-and-press-releases/notices/2020/the-riksbank-to-test-technical-solution-for-the-e-krona/
The Bahamas: Sand Dollar
The Bahamian CBDC project is called “Sand Dollar” and The Central Bank of the Bahamas has confirmed it is moving ahead with the nationwide launch of its digital currency sometime in October. That will make it probably the first official CBDC to launch anywhere in the world.
Eastern Caribbean Currency Union (ECCU): DXCD
The Eastern Caribbean Central Bank (ECCB) initiated its CBDC project DXCD in March 2019. This CBDC is being tested in selected pilot countries for six months. The pilot involves a securely minted and issued digital version of the EC dollar — DCash. This DCash will be issued by the ECCB, and distributed by licensed banks in the Eastern Caribbean Currency Union (ECCU). It will be used for financial transactions between consumers and merchants, people-to-people (P2P) transactions.
https://eccb-centralbank.org/p/about-the-project
Marshall Islands: SOV
In February 2018, the Republic of the Marshall Islands (RMI) revealed plans for the issuance of a digital currency, the Sovereign (SOV). It Seeks to establish a ‘Self-Sovereign Identity’ With New Blockchain-Based Currency. The tiny isolated Pacific Iceland has population of about 75,000 ready to lunch its CBDC. https://sov.foundation
Putting it all together…
More and more central banks show interest in CBDCs. More and more CBDC projects are now reaching the test stage. Central bank in France has now selected Tezos to develop its Digital Euro. Due to on going Covid 19 pandemics most of the countries economy are in deep trouble, Governments want to reach people directly and get economical and social data in a very secured and transparent way. This crisis time is definitely a boost for CBDC development worldwide.
