The current state of development of central bank digital currency (CBDC) around the world


In the first week of November 2021, the Bank of England and the UK Department of Finance announced their intention to conduct a “formal consultation” on the creation of a central bank digital currency or CBDC. If the consultation is successful, Britons can look forward to the creation of a blockchain-based digital currency that will serve as legal tender by the end of the decade.

The UK’s CBDC promises to facilitate financial transactions and bring people without access to banking services into the wider economy. Despite this, the UK is relatively late in the CBDC ecosystem. Indeed, many comparable projects are already underway, mainly in emerging economies. Then there are the more notable (and controversial) CBDCs like the Chinese digital yuan, which is intended for incredibly ambitious purposes.

Make no mistake about it: digital currencies from central banks will arrive in most countries of the world before the end of the decade, as their unique advantages, speed of use, profitability and compatibility with an increasingly global economy. more digital technology leaves nations no real choice in the matter.

This article will provide an introduction to CBDCs, in particular:

  • An overview of CBDCs – including their uses and technology

  • An analysis of their potential impact

  • Finally, a survey of the most important and notable CBDC projects

The CBDC announcement in the UK was one of several reports on the CBDC to appear in the news cycle in November. A competition organized by the Monetary Authority of Singapore (MAS) awarded German company Giesecke + Devrient and CBDCgo $ 50,000 each for the development of technologies that support CBDCs in the nation-state. Likewise, these government-backed assets are experiencing an influx of institutional involvement in an attempt to improve the ecosystem as a whole. Indeed, institutions including the World Bank and the International Monetary Fund (IMF) are pursuing the case.

What are central bank digital currencies (CBDCs)?

Simply put, a CBDC is a virtual form of a country’s paper money (coin). While most of the proposed CBDC projects exploit blockchain technology in the implementation, CBDCs are different from cryptocurrencies like Bitcoin and Ethereum. Unlike cryptocurrencies – which are typically created and regulated by individuals or organizations – CBDCs are created by the monetary authority of a particular country, for example. the US Federal Reserve.

This is because CBDCs are created alongside a country’s printed / stamped fiat currency and therefore have a value equal to 100% of the currency to which they are linked – be it dollars, crowns, rupees or pesos – and therefore are legal tender.

Currently, no CBDCs are formally used, but their proposed adoption could bring several advantages and disadvantages.

Proposed benefits of CBDCs

  • Can simplify business-to-consumer transactions much like online banking.

  • Can facilitate the implementation of monetary policy (e.g. tax collection)

  • Can democratize banking services in emerging countries. For example, in rural cash-based economies, some citizens do not have access to banking services. Using CBDC can remedy this problem (when paired with smartphones)

  • Can eliminate the risks and costs associated with the use of intermediaries. As the CBDC allows the bank without the banks, it can avoid problems like the 2008 financial crisis or the bank runs.

Possible disadvantages:

  • The use of CBDC could reduce individual freedoms. It will be much more difficult to make discrete individual transactions or to maintain confidentiality.

  • Some analysts argue that using CBDC does not solve financial centralization problems

  • CBDCs can be used for nefarious purposes such as punishing citizens for unwanted behavior by freezing their funds or blocking access to online retail services.

Why do CBDC projects use blockchain technology?

While not a necessary prerequisite, the majority of CBDC projects take advantage of blockchain technology (88%) due to the following benefits:

  • Blockchain provides bespoke design and integrated platforms that share / hold value securely

  • They allow smart contract programmability allowing the triggering of financial functions including automatic payments based on predefined conditions (for example, automatically paying your bills on the 5th and 15th)

  • Blockchain also increases transparency of audit trails to reduce taxes and provides privacy features not available in online banking.

  • The use of blockchain also improves interoperability with other digital assets (NFT, DeFi protocols, stablecoins, etc.)

  • Blockchain technology is immutable and trustless, and authorized blockchain networks offer flexible scaling and speed while giving the operator full control over privacy and nodes.

What are the biggest CBDC projects in 2021?

Since 2014, more than 60 central banks have started pursuing CBDC projects. These projects can be divided into two categories: retail projects and interbank / wholesale projects.

Retail projects

Retail projects allow individuals to hold a CBDC as they would any other currency. These projects are generally more advanced in emerging economies. Here are 5 new interesting projects.

  • Bahamian Dollar – Released in 2019, this digital version of the Bahamian Dollar is issued by authorized financial institutions. It is accessible via a mobile phone / digital wallet, and supports the issuance of micro-loans. It is the most advanced and widely adopted project on this list.

  • Cambodia Bakong Project – Launched in 2018 and officially launched in 2020, this quasi-CBDC project links 11 commercial banks, creating an interbank payment system. The Cambodian CBDC is also experimenting with transactions with Maybank (a Malaysian-based bank), making it easy for Cambodians abroad to transfer money home. As with most retail projects, CBDC Bakong seeks to provide banking services to rural Cambodians. It will also increase the dependence on the Cambodian riel and reduce the dependence on the US dollar.

  • Digital Yuan (DCEP) – China’s first foray into CBDCs began in 2014 and was piloted in 4 major cities. The Digital Currency Electronic Payment (DCEP) system, also known as digital yuan or e-yuan, is designed to replace physical currency while providing more control to central Chinese authorities. 300 million US dollars are currently in circulation. Experts believe it will be strongly encouraged during the 2022 Beijing Winter Olympics.

  • E-hryvnia – This Ukraine-based CBDC completed its pilot project in December 2018. The E-hryvnia project focused on analyzing the effects of the CBDC on macroeconomic stability. This piece is remarkable because it was the first CBDC project in Europe.

  • e-peso – USD 20 million Uruguayan e-peso was issued to 10,000 Uruguayan citizens between 2017 and 2018, where it was used on an experimental basis in registered businesses. After the completion of the pilot study, it was cashed in and destroyed.

Wholesale / interbank projects

Interbank / wholesale applications restrict their use to financial institutions. Here are 3 main current implementations.

  • Inthanon-LionRock – Launched in 2017, this Hong Kong-based CBDC has demonstrated great potential in wholesale / cross-border transactions. This CBDC will strengthen the economic relationship between Thailand and Hong Kong and is designed to position the city as a hub for offshore RMB payments.

  • Ubin – Ubin is Singapore’s blockchain-based CBDC. It is designed to facilitate transactions between different central banks in different countries.

  • Jasper-Ubin – These are actually two projects. These Canada-based CBDCs – Project Jasper and Project Jasper-Ubin – were launched in 2017 and 2019 respectively. The two CBDCs focus on interbank payments, settlements and cross-border / inter-currency payments.


The UK, and indeed much of the west, is still late in adopting the CBDC. Likewise, although promising, the effectiveness of this technology remains to be proven. One thing is certain however, CBDC has shown great promise in multiple applications.

If new developments are to take place, future iterations will, in all likelihood, result in a government-backed digital currency in every country, from the European Union (with its future digital finance strategy legislation) to emerging economies like the ‘South Africa.

It remains to be seen whether they can live side by side with public blockchain-based stablecoins and cryptocurrencies whose value is tied to national currencies. There are currently concerns that stablecoins may not be fully 1: 1 guaranteed in fiat like the USD, which could lead to a damaging liquidation in the future.

However, what should be of more concern to every citizen and investor in the world at this time is how the CBDCs will be implemented. Will it be a machinery of government that will have a greater influence on our finances, our behavior and our freedoms, or will their cost-benefits be passed on to the citizens? Only time will tell. Given the history of money printing by most central banks over the past 100 years, caution is indeed required.



About Ruben V. Albin

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