The recent history of central bank digital currencies (CBDCs) has been marked by continuous exploration and development. By March 2024, over 130 countries were actively engaged in CBDC research with 3 countries, territories or currency unions having launched CBDCs, and 36 implementing pilot programs. [1]
On 9 August 2022, the Reserve Bank of Australia announced a research project to explore a CBDC in Australia, in collaboration with the Digital Finance Cooperative Research Centre (DFCRC). [2]
On 20 October 2020, the Central Bank of the Bahamas introduced the "Sand Dollar" as a digital legal currency equivalent to the traditional Bahamian dollar. [3] [4] [5]
The Central Bank of Brazil was developing a digital version of the Brazilian sovereign currency, known as Drex, based on the guidelines established in May 2021, and aiming to release the CBDC by the end of 2024. [6] It received praise from the International Monetary Fund (IMF) for its role in driving financial innovation and expanding digital financial services in Latin America. [7]
Since 2014, China's central bank has been working on a project called DCEP (Digital Currency Electronic Payment) or digital renminbi, [8] often also referred to as the "digital yuan" as it would be backed by the yuan. [9]
At the end of 2017, the China's central bank organized a number of banks and institutions to jointly develop the DCEP system. In April 2020, DCEP began to be tested in four big Chinese cities: Shenzhen, Suzhou, Xiong'an and Chengdu. [10]
The Shenzhen and Suzhou trials chose participants through a lottery, enabling them to use the DCEP in designated specific areas. The Shenzhen trial only included online payment functionalities, generally using QR codes like Alipay and WeChat Pay. However, along with online payments, the Suzhou trials also enabled the users to make near-field communication (NFC) offline payments. This feature was originally designed for people in rural areas who do not have reliable internet access. [11]
After the successful CBDC pilot, Suzhou City Municipal signed a Memorandum of Understanding (MoU) with the New York-based blockchain startup, Cypherium for the company to help the city in the development of products in the city. [12] [13] [14] [15] [16]
At the end of 2021 there were 261 million users in the extended trial who had made US$13.8 billion of transactions [17] It has also been rolled out for foreign attendees at the 2022 Winter Olympics in Beijing, where it has seen limited use due to entrenched digital currencies and Visa, as well as lack of publicity. [18]
On March 31, 2022, People's Bank of China announced that the testing has been further expanded to six additional regions: Tianjin, Chongqing, Guangzhou, Fuzhou, Xiamen, and six cities in the province of Zhejiang that are hosting the 2022 Asian Games (Hangzhou, Ningbo, Wenzhou, Huzhou, Shaoxing, and Jinhua). Another news statement from PBOC shows that the city of Beijing and Zhangjiakou are also being included on the list of testing after the 2022 Winter Olympics. [19] [20]
The Eastern Caribbean Central Bank (ECCB) launched the CBDC known as "DCash" in March 2021 to Antigua and Barbuda, Grenada, St. Kitts and Nevis, and St. Lucia, becoming the first CBDC to be introduced in a currency union. It subsequently rolled out the CBDC to the rest of the Organization of Eastern Caribbean States, including St. Vincent and the Grenadines, Dominica, Montserrat and Anguilla. [21] [22]
On 12th January 2024, DCash was closed for problems that prevented user from accessing their digital wallets. DCash 2.0 was anticipated to be launched in 2026. [23] [24]
One of the earliest examples of retail CBDC was in Ecuador from 2014 to 2018, when the central bank created a broadly accessible pilot retail CBDC that operated through citizens' mobile phones (it did not employ blockchain technology) under the name "Dinero Electrónico" (DE). Even when some authors point to low citizen adoption as a main reason to its fall, [25] it reached more than 400,000 accounts and more than USD 10 million in deposits. [26] The program might have closed due to a combination of factors, including a defective implementation, the lack of procedures to preferential use in public expenditures, and mainly, commercial bank opposition. [26]
Incumbent banks perceived DE to be a threat to their payment business. The perceived threats included loss of revenue from processing payments and a potential reduction in the size of their customer base. The incumbent banks were vociferous in calling out the possibility of an evolution of DE into a sovereign currency (Asobanca n.d.), which implied a de facto de-dollarization that would bring inflation and instability to the Ecuadorian economy. This was the banks' main public criticism, as clearly stated by the BCE's general manager: "[they] wanted to mix the use of a payment system available in mobile phones with a de-dollarization process" (La Hora 2016). Ultimately, the banking sector's opposition contributed significantly to DE's demise, as admitted by the new government's BCE general manager (Artola, 2017). [26]
In the Eurozone, the Bank of Spain's former governor Miguel Angel Fernandez Ordoñez has called for the introduction of a digital euro, but the European Central Bank (ECB) has so far denied such possibility. [27] Nevertheless, in December 2019, the ECB stated that "The ECB will also continue to assess the costs and benefits of issuing a central bank digital currency (CBDC) that could ensure that the general public will remain able to use central bank money even if the use of physical cash eventually declines". [28] On 2 October 2020 the ECB nonetheless published a report on the proposed digital euro and kickstarted a two-year study phase to prepare a decision for a central bank digital currency. [29] [30] [31]
After completing the study phase, the ECB decided on 18 October 2023 to enter into a preparation phase for the potential issuance of a digital euro. [32]
In June 2021, the Swiss National Bank and Bank of France launched a cross-border CBDC payments trial designed for wholesale (bank-to-bank, rather than with regular consumers) transactions. Switzerland had previously tested a digital Swiss franc for instant transactions on SIX Swiss Exchange, its premier stock exchange. [33]
The Reserve Bank of India (RBI) on 16 December 2020 announced a regulatory sandbox to test next generation technologies on cross border payments to collect field test data and evidence of benefits and risks on the financial ecosystem. [34] On 29 January 2021, Government of India proposed a bill to ban trading and investments in cryptocurrencies while giving legal power to the RBI for developing CBDC. [35] [36]
During the announcement of the 2022 Union budget of India, Nirmala Sitharaman from Ministry of Finance announced the roll out of the Digital Rupee from 2023. [37] As per the RBI Payments Vision 2025 document released on 17 June 2022, CBDC will be used for domestic and cross border payment processing and settlement. RBI classified CBDC into retail CBDC that will be designed to complete individual financial needs and wholesale CBDC which will be traded between RBI, Public and Private sector banks for currency distribution purpose and economic stability. [38] [39]
Pilot project for digital rupee was launched on 1 November 2022. [40]
Bank Indonesia initiated Garuda Project, a project to develop Indonesian central bank digital currency on 30 November 2022. [41] Bank Indonesia issued the white paper on digital Rupiah development. [42] By passage of the Law on Financial Sector Development and Strengthening, digital Rupiah is legalized as form of Rupiah. [43]
2016-2018 interest in CBDCs in Iran was alleged by American analysts to be for the purposes of evading American sanctions. [33]
Jamaica launched its CBDC known as "Jam-Dex" in July 2022, with its central bank recognizing the Jam-Dex as a legal tender, making it the first country in the world to legalise CBDC. [44] [45]
On 26 June 2022, Myanmar's National Unity Government (NUG) issued an official statement [46] regarding the establishment of DMMK, along with its companion mobile wallet NUGPay, although the news was announced in earlier date. [47] According to Ministry of Planning, Finance and Investment of NUG, 1 DMMK is equivalent to 1 MMK and the exchange rate will be announced on weekly basis. [48]
In May 2021, the Central Bank of Nigeria announced that Nigeria would create a digital currency. [49] In July 2021 it further said that it will launch the pilot scheme on 1 October 2021. [50] Following these announcements, the central bank named Bitt Inc. in August 2021 as its technical partner for Nigeria's digital currency that would be known as ENaira. [51]
In September 2021, public consultation on a CBDC for New Zealand was opened by the Reserve Bank. [52] The potential digital currency would be tied 1:1 to the New Zealand dollar. [53]
In April 2021, after four years of research, Norway's Norges Bank announced plans to start testing technical solutions for a CBDC over the following two years. [33]
In October 2020, the Central Bank of Russia published a consultation paper on a digital ruble. It aims to have a prototype ready by the end of 2021 and start pilots and trials in 2022. [33]
On June 21, 2023, the Monetary Authority of Singapore (MAS) published a whitepaper proposing a common protocol to specify conditions for the use of digital money including CBDCs on a distributed ledger. The whitepaper was developed in collaboration with the International Monetary Fund, Bank of Italy, Bank of Korea, financial institutions and fintech firms. [54]
The central bank of Sweden proposed an "e-krona" in November 2016, [55] and started testing an e-krona proof of concept in 2020. [56] [57] [58] The 2020 phase focused on internal simulations within Sweden's central bank; the 2021 second phase is to include transactions with outside entities, such as commercial banks. [33] The 2022 third phase focused on the requirements. [59]
In January 2021, the Central Bank of the Republic of Turkey (CBRT) announced a planned digital currency trial in the second half of 2021. [33]
The CBRT successfully tested the first payment transaction using the digital lira in January 2023, and planned to run further phases of pilot studies to widen participation in 2023. [60]
On March 23, 2023, The Central Bank of the United Arab Emirates (CBUAE) announced the commencement of the implementation of the CBUAE Central Bank Digital Currency (CBDC) Strategy. [61]
On October 2, 2023, the United Arab Emirates enacted Federal Law No. 54 of 2023, broadening the definition of currency to include a “National Digital Currency”. The amended law was published on 31 October 2023. [62]
On January 29, 2024, the UAE sent the first cross border payment using the Digital Dirham. The payment of Dirham 50 million ($13.6m) was made to China. [63]
In December 2018, the National Bank of Ukraine piloted a digital currency, the e-hryvnia, with about 5,500 tokens. It is considering how to technically advance a nationwide launch. [33]
The Bank of England discussed a blockchain-based central bank currency in a September 2015 speech by chief economist Andrew G. Haldane, on possible ways to implement negative interest rates. [64] A March 2016 speech by Ben Broadbent, the bank's deputy governor of monetary policy, appears to be the first use of the phrase "central bank digital currency", and notes direct inspiration by Bitcoin. [65] [66] In April 2021, the Bank of England and HM Treasury announced a joint CBDC Taskforce to examine the possibility of a CBDC in the UK. [33]
In May 2021, Federal Reserve Chair Jerome Powell announced plans to publish a discussion paper on central bank digital currency, focusing on the possibility of issuing a US CBDC. Powell believed that a potential CBDC would complement the use of cash and bank deposits rather than replacing them. [67] In February 2022 the Federal Reserve Bank of Boston released initial details of Project Hamilton, a potential United States CBDC. While incorporating some of the architecture of bitcoin, it would not be decentralized nor have mining. [68]
Also in May 2021, the Digital Dollar Project, which is not affiliated with the United States government, planned to launch five pilot programmes, testing the potential use of a central bank digital currency in the United States of America. [69]
On March 9, 2022, President Joe Biden signed an executive order on ensuring responsible development of digital assets, the White House said. [70]
On November 15, 2022, the Federal Reserve Bank of New York's Innovation Center (NYIC) announced a 12 week proof-of-concept pilot program. The pilot will build a prototype and test a theoretical network known as the regulated liability network (RLN). The network will aim to provide a "... multi-asset, always-on, programmable infrastructure containing digital representations of central bank, commercial bank, and regulated non-bank issuer liabilities, denominated in U.S. dollars." [71] The pilot project will be conducted[ when? ] in a test environment and will only use "simulated data" with a version of the RLN that operates exclusively in U.S. dollars. Commercial banks will issue simulated digital money as fungible tokens that will represent customer deposits, and settle through simulated central bank reserves via a distributed multi-entity ledger. [72]
Several major U.S. banks are participating in the pilot, including BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo. Swift will support international interoperability. [71]
In November 2017, the central bank of Uruguay announced to begin a test to issue digital Uruguayan pesos. [73] [74]
A central bank, reserve bank, national bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base. Many central banks also have supervisory or regulatory powers to ensure the stability of commercial banks in their jurisdiction, to prevent bank runs, and in some cases also to enforce policies on financial consumer protection and against bank fraud, money laundering, or terrorism financing.
In economics, cash is money in the physical form of currency, such as banknotes and coins.
The renminbi is the official currency of the People's Republic of China. It is the world's 5th most traded currency as of April 2022.
The rupiah is the official currency of Indonesia, issued and controlled by Bank Indonesia. Its name is derived from the Sanskrit word for silver, rupyakam (रूप्यकम्). Sometimes, Indonesians also informally use the word perak in referring to rupiah in coins. The rupiah is divided into 100 cents, although high inflation has rendered all coins and banknotes denominated in cents obsolete.
Digital currency is any currency, money, or money-like asset that is primarily managed, stored or exchanged on digital computer systems, especially over the internet. Types of digital currencies include cryptocurrency, virtual currency and central bank digital currency. Digital currency may be recorded on a distributed database on the internet, a centralized electronic computer database owned by a company or bank, within digital files or even on a stored-value card.
Central bank liquidity swap is a type of currency swap used by a country's central bank to provide liquidity of its currency to another country's central bank. In a liquidity swap, the lending central bank uses its currency to buy the currency of another borrowing central bank at the market exchange rate, and agrees to sell the borrower's currency back at a rate that reflects the interest accrued on the loan. The borrower's currency serves as collateral.
Since the late-2000s, the People's Republic of China (PRC) has sought to internationalize its official currency, the Renminbi (RMB). RMB internationalization accelerated in 2009 when China established the dim sum bond market and expanded Cross-Border Trade RMB Settlement Pilot Project, which helps establish pools of offshore RMB liquidity. The RMB was the 8th-most-traded currency in the world in 2013 and the 7th-most-traded in early 2014. By the end of 2014, RMB ranked 5th as the most traded currency, according to SWIFT's report, at 2.2% of SWIFT payment behind JPY (2.7%), GBP (7.9%), EUR (28.3%) and USD (44.6%). In February 2015, RMB became the second most used currency for trade and services, and reached the ninth position in forex trading. The RMB Qualified Foreign Institutional Investor (RQFII) quotas were also extended to five other countries — the UK, Singapore, France, Korea, Germany, and Canada, each with the quotas of ¥80 billion except Canada and Singapore (¥50bn). Previously, only Hong Kong was allowed, with a ¥270 billion quota.
2C2P is a financial services company headquartered in Singapore. The company primarily provides payment gateway services to businesses.
A central bank digital currency is a digital currency issued by a central bank, rather than by a commercial bank. It is also a liability of the central bank and denominated in the sovereign currency, as is the case with physical banknotes and coins.
The Zimbabwean dollar, also known as the Zimdollar or Real Time Gross Settlement (RTGS) dollar, was the currency of Zimbabwe from February 2019 to April 2024. It was the only legally permitted currency for trade in Zimbabwe from June 2019 to March 2020, after which foreign currencies were legalised again.
Dedollarisation refers to countries reducing reliance on the U.S. dollar as a reserve currency, medium of exchange or as a unit of account.
USD Coin (USDC) is a digital stablecoin pegged to the United States dollar. USD Coin is managed by Circle. USDC is issued by a private entity and should not be confused with a central bank digital currency (CBDC).
Digital renminbi, or Digital Currency Electronic Payment, is a central bank digital currency issued by China's central bank, the People's Bank of China. It is the first digital currency to be issued by a major economy, undergoing public testing as of April 2021. The digital RMB is legal tender and has equivalent value with other forms of renminbi, also known as the Chinese yuan (CNY), such as bills and coins.
The E-Cedi is a proposed central bank digital currency (CBDC) for Ghana. Dr. Ernest Addison is the Governor of the Bank of Ghana. In June 2021, he announced the development of the E-Cedi.
The general notion of cryptocurrencies in Europe denotes the processes of legislative regulation, distribution, circulation, and storage of cryptocurrencies in Europe. In April 2023, the EU Parliament passed the Markets in Crypto Act (MiCA) unified legal framework for crypto-assets within the European Union.
The Digital Rupee (e₹) or eINR or E-Rupee is a tokenised digital version of the Indian Rupee, issued by the Reserve Bank of India (RBI) as a central bank digital currency (CBDC). The Digital Rupee was proposed in January 2017 and launched on 1 December 2022. Digital Rupee is using blockchain distributed-ledger technology.
FedNow is an instant payment service developed by the Federal Reserve for depository institutions in the United States, which allows individuals and businesses to send and receive money. The service launched on July 20, 2023. Banks will be able to build products on top of the FedNow platform. By 2024, hundreds of banks and credit unions were reportedly utilizing the service.
mBridge is a multi-CBDC platform developed to support real-time, peer-to-peer, cross-border payments and foreign exchange transactions using CBDCs. Based on a blockchain called the mBridge Ledger, the platform is designed to ensure compliance with jurisdiction-specific policy and legal requirements, regulations, and governance needs.
A Digital Euro, is the project of the European Central Bank (ECB), decided in July 2021, for the possible introduction of a central bank digital currency (CBDC). The aim is to develop a fast and secure electronic payment instrument that would complement the Euro for individuals and businesses in its existing form as cash and in bank accounts, and would be issued by the European System of Central Banks of the Eurozone.
Mojaloop is an open-source software project of the Mojaloop Foundation. The project is a reference model for creating interoperable payments platforms for digital financial providers intended to reduce the technical barrier of financial inclusion efforts. It was created and released by the Bill & Melinda Gates Foundation’s Level One Project in 2017. Moja is a Swahili word meaning "one".
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