New research from the US-based Atlantic Council has revealed that 130 countries are studying the prospects of central bank digital currencies (CBDC), with cross-border payments driving the impetus.
According to a Reuters report, the new data suggests that 98% of the global economy is working to develop CBDC, a move that experts say could have far-reaching implications for the financial ecosystem. According to the report, all G20 countries except Argentina are moving towards CBDCS adoption with varying degrees of intensity.
A basic issue for CBDC experiments is the lack of consistency between central banks. While some banking regulators are examining the prospects of wholesale CBDCs, others are content to explore their retail variant or juggle both classes.
Some central banks, like the Reserve Bank of India (RBI), have said they will take a slow and steady approach to CBDC development to avoid potential pitfalls. However, the Bank of Russia opts to up the ante on CBDC development to evade sanctions.
The report noted a significant surge in global interest in CBDC after Western powers imposed economic sanctions on Russia over its invasion of Ukraine. Central banks are particularly interested in using CBDCs to improve the current state of cross-border transactions and have conducted several joint studies on functionality.
“Since Russia’s invasion of Ukraine and the response of G7 sanctions, wholesale CBDC developments have doubled,” the Atlantic Council said.
Another factor driving the rapid development of CBDCs is the decline in cash consumption since the outbreak of the COVID-19 pandemic and fears of “cryptoization” of their local economy.
A handful of countries like Jamaica and Nigeria have launched their CBDC, but while adoption rates continue to fluctuate, other countries are attempting to roll out their own versions. China, Russia, India and Brazil are slowly approaching full-scale adoption, while the European Central Bank (ECB) is targeting a 2028 launch date.
Brave attempts to unify developments
International organizations such as the International Monetary Fund (IMF), the G7 and G20 countries have expressed a desire to standardize CBDC developments in all areas. To achieve this goal, the IMF has published a handbook to provide technical guidance to central banks looking to explore CBDCs.
“The handbook will be a compendium of knowledge and experience on CBDCs,” said Bo Li, deputy managing director of the IMF. “It will be the basis for capacity development and hopefully will help countries make the most informed decisions as they take the big step of designing and issuing their own CBDC.”
In April, the G7 pledged to support developing countries with a framework to guide the development of retail CBDCs for common minimum operating standards.
To learn more about central bank digital currencies and some of the design decisions to consider when creating and adopting them, read nChain’s CBDC playbook.
Watch: Blockchain provides the perfect foundation for CBDC
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