Majority of central banks planning for digital currencies
Cryptocurrencies like Bitcoins fascinate many but it’s a risky business as the value changes dramatically and savings in cryptocurrencies can lose a lot of their value over night. But digital money is coming. A report by consultancy PwC shows that more than 80% of central banks are considering launching a central bank digital currency (CBDC).
Central bank digital currencies would have a value guaranteed by the central bank and would not suffer from the potential volatility that can be the negative surprise using cryptocurrencies.
Digital currencies are essentially e-cash that doesn’t need any special indigenous methods to encrypt them like cryptocurrencies that are stored on a blockchain.
The past year has seen progress on a number of CBDC projects, the PwC report shows.
Retail CBDC projects in the PwC Index are led by the Central Bank of Nigeria’s (CBN) eNaira, the first CBDC in Africa, and the Sand Dollar, issued by the Central Bank of the Bahamas as legal tender in October 2020, making the Bahamas the first country to launch a CBDC.
China became the first major economy to pilot a CBDC in 2020 with the digital yuan, and as of March 2022 pilot programs are running in 12 cities, including Beijing and Shanghai, PwC says.
The PwC report also provides an overview of stablecoins, digital currencies designed to have a stable value linked to traditional currencies or assets like gold and thereby less volatile than cryptocurrencies.
“Central banks are ramping up activity in the digital currency space. Countries are at differing levels of maturity with CBDCs and each country has different motivating factors”, says Hyden Jones, blockchain and crypto specialist at PwC.
“Increasing financial inclusion, facilitating cross border payments and controlling financial crime are all factors that come into play. We expect CBDC research, testing and implementation will intensify in 2022. The success of Nigeria’s eNaira is likely to spur CBDC development in countries where financial inclusion is one of the key desired outcomes.”
UK’s Treasury has announced that it will regulate some cryptocurrencies and that it’s ambition is to make the UK a hub for digital payment companies. Stablecoins, designed to have a stable value linked to traditional currencies or assets like gold, will be a recognized form of payment with the Treasury estimating that this will make people more confident if using digital only currencies. Stablecoins is already used in for instance the US.
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