CBDC Development: A Look at the Progress Made by Different Countries
Sophia Cruz • 2 min read
Global development is what every country aims for. As the world rides the digital innovation wave, we gradually adapt the use of technology, particularly the use of cryptocurrency as an efficient medium of exchange. The Central Bank Digital Currency or CBDC is a new type of central bank liability issued in digital form which most countries are currently exploring and testing as on date. Here’s a look at where leading economies stand in their experiments with CBDCs.
South Korea’s Own Digital Currency
Since the rising of CBDC has just begun, South Korea steps in to start testing the project. Earlier this week, South Korea’s central bank announced that they will be initiating the CBDC pilot program. South Korea is now in the process of selecting a technology vendor to build the said platform. The Bank of Korea was preparing for the changes that may occur and opened bidding to research the practicalities of a CBDC.
US Digital Dollar
Aside from South Korea, the U.S. Federal Reserve also initiated a move this summer with regards to a possible US digital dollar. The Federal Reserve did not explain any plans yet apart from releasing a research paper about the exploration of the CBDC.
According to a report, the Federal Reserve plans to release a product two years from now called “FedNow” after examining the payment system of the country for several years. In addition to the CBDC program, the Fed is collaborating with different groups and projects, including the Bank for International Settlements (BIS).
China’s Digital Yuan
Recently, China announced a ban on the use of cryptocurrency by financial institutions, online payment channels, and other services related to it which tightens the crypto regulation. At the same time, China is backing its own Digital Yuan by piloting and starting trials for various cities including Suzhou, Shenzhen, Xiong’an and Chengdu. Online payments to Alibaba’s online store has been activated as well on May 11, allowing billions of clients to use digital yuan as a form of payment.
If there are no other enhancements to be implemented or possible glitches to fix, the trial period will last till 2023. The trial will also include testing in terms of how the digital currency will be ready for commercial and international use, which can get enforced around 2024 or 2025.
The Central Bank Digital Currency is now on the move and at present spreading onto the other side of the globe. According to Deloitte, close to 60 central banks are researching CBDC adoption and outcome, 36 banks are considering retail and wholesale CBDCs, and 18 banks are contemplating only retail CBDCs. The e-CNY or also known as Digital Yuan is part of the retail project.
Most nations are now taking part in the advancement of CBDC and have started research and exploration about the program in recent months. China led the way to the path of central bank digital currency development. Any progress in digital yuan will definitely influence other country’s CBDC program.