As the world continues to explore the potential of blockchain technology and digital currencies, central banks are taking steps towards developing and piloting central bank digital currencies (CBDCs).
Here at WhiteFlo, we are working on enabling our customers to provide their clients with the ability to operate with any crypto and fiat currencies. Naturally, we are interested in how quickly CBDCs will enter our lives and at what stage the development of these state electronic currencies is currently around the world.
In this article, we'll take a closer look at countries that have either launched or are preparing to launch CBDCs.
Countries That Have Launched CBDCs
China's central bank, the People's Bank of China, has issued the Digital Currency Electronic Payment (DCEP) or digital renminbi (e-CNY), the first digital currency issued by a major economy. The digital RMB has equivalent value with other forms of the renminbi, such as bills and coins, and is legal tender. It underwent public testing as of April 2021 and is designed to move instantaneously in both domestic and international transactions, aiming to be cheaper and faster than existing financial transactions. Transactions can take place between two offline devices using the technology. However, the digital renminbi is also seen by some commentators as a tool for Chinese government surveillance and control over users and their financial transactions.
According to the information gathered through our research, the Eastern Caribbean Currency Union launched the DCash digital currency in 2021, which is currently being used by several countries, including Antigua, Barbuda, Grenada, Dominica, Montserrat, Saint Vincent, the Grenadines, Saint Kitts and Nevis, and Saint Lucia. DCash is a digital currency that aims to increase financial inclusion in the Caribbean region. It is worth noting that DCash is not a public blockchain.
In August 2021, Jamaica became the first country to recognize a CBDC as a legal tender with the launch of its central bank digital currency. The Bank of Jamaica controls digital currency, which is not based on blockchain technology, and it is intended to provide a secure and efficient method of payment.
The Sand Dollar, which was launched by the Central Bank of The Bahamas in October 2020, is also a CBDC that is currently in circulation. The Sand Dollar is built on a blockchain platform, but it is not clear which specific blockchain is being used. The Sand Dollar is accessible through authorized financial institutions, which act as agents of the Central Bank of The Bahamas and can be used for transactions within the country.
The Sand Dollar aims to increase financial inclusion and reduce the cost of financial transactions, particularly for people who live in remote areas or without access to traditional banking services. The Sand Dollar can be accessed through various authorized financial institutions, including Omni Financial Group Limited, MoneyMaxx, Island Pay, SunCash, Cash N’ Go, Kanoo Pays, and MobileAssist.
Overall, the Sand Dollar is a pioneering example of a successful CBDC that is providing greater financial inclusion and access to financial services in The Bahamas. It demonstrates the potential of digital currencies and blockchain technology to improve financial systems and promote economic development in various countries around the world.
CBDCs in Pilot Phase
Several central banks are currently piloting CBDCs to test the viability of blockchain technology in payments and monetary systems.
Sweden's Riksbank launched a pilot of its e-krona digital currency in 2021. The e-krona is based on a blockchain that provides three types of nodes, controlled by the central bank and participating banks. The e-krona is designed for retail payments and will be accessible through wallet services provided by banks and third-party providers.
The Bank of Ghana started a pilot of its eCedi digital currency in 2022, based on a two-tiered blockchain system. The eCedi aims to promote financial inclusion and reduce the cost of financial transactions in Ghana.
The Central Bank of Russia launched a pilot of its digital ruble in 2021, with 15 banks participating. The digital ruble is a two-tiered cryptocurrency with some features similar to smart contracts. It is designed to provide greater transparency and efficiency in payments.
Nigeria is also currently piloting its eNaira digital currency, which began in September 2021. The eNaira is based on a centralized blockchain system and aims to provide greater financial inclusion and reduce the cost of financial transactions in Nigeria. The eNaira is accessible through authorized financial institutions supervised by the Central Bank of Nigeria, and conversion between the eNaira and traditional currency can be done within these institutions.
The National Bank of Ukraine is piloting its e-hryvnia digital currency, which is based on blockchain technology, but with few details available on its specific implementation. The e-hryvnia is designed to reduce transaction costs and increase the speed of financial transactions while promoting financial inclusion.
The Reserve Bank of India planned to launch a pilot of its eINR digital currency in December 2022. The eINR will be based on blockchain technology and aims to provide a secure and efficient means of digital payments.
The Federal Reserve has not yet announced plans to launch a CBDC, but it has been exploring the possibility and conducting research. In March 2021, the Federal Reserve Bank of Boston announced that it had been working with the Massachusetts Institute of Technology to develop a hypothetical digital currency, called the "Digital Dollar Project." The project aims to explore the benefits and challenges of a digital currency issued by the Federal Reserve and how it could improve the efficiency and inclusivity of the U.S. financial system.
According to the Bank of Canada website, the bank currently has no plans to issue a digital currency. However, they have been exploring the possibility of a CBDC for several years and have conducted various research projects and pilot studies. In February 2020, the Bank of Canada published a report outlining the benefits and challenges of a CBDC, and in May 2021, it announced plans to launch a CBDC if necessary.
Since 2017, the Monetary Authority of Singapore has been researching CBDCs and launched a pilot study in November 2019 to explore their use in cross-border payments and settlements between Singapore and Canada. Today, MAS is among several central banks piloting CBDCs to test the viability of blockchain technology in payments and monetary systems. MAS launched Ubin+ in 2022, an initiative focused on advancing cross-border connectivity in wholesale CBDCs. The goal of Ubin+ is to study business models and governance structures for cross-border foreign exchange settlement, develop technical standards and infrastructure to support cross-border connectivity and interoperability and establish policy guidelines for the connectivity of digital currency infrastructure across borders.
The European Central Bank (ECB) has been exploring the possibility of a digital currency for several years and has conducted various research projects and consultations. In July 2021, the ECB announced that it would launch a two-year investigation phase to assess the feasibility and potential benefits of a digital euro. The investigation phase will involve consultations with citizens, professionals, and stakeholders to assess the potential impact of a digital euro on the economy and financial system. The ECB has not yet announced plans to launch a CBDC.
Exploring the Possibility of Launching CBDCs
While several countries, including Australia, Brazil, Chile, Colombia, Japan, South Korea, Thailand, Turkey, and others, have expressed interest in exploring the potential benefits of a CBDC and have conducted various research projects and consultations to assess its feasibility and impact, some of these countries or others may have concrete plans to launch a CBDC. The situation in each country may vary, and developments in this area should be closely monitored as they can be dynamic.
After exploring the potential of blockchain technology and digital currencies, several central banks are now taking steps towards developing and piloting central bank digital currencies (CBDCs). Some countries have already launched their CBDCs, while others are in the pilot phase or considering the possibility of launching one. CBDCs have the potential to revolutionize the way transactions are conducted and improve financial inclusion and efficiency.
However, not all national digital currencies are currently compatible with payment gateways, such as The Bahamas' Sand Dollar, which can only be accessed through authorized financial institutions supervised by the Central Bank of The Bahamas. This highlights the need for businesses to be prepared to adapt to this new payment method.
WhiteFlo is a white-label crypto processing software that can help businesses prepare for the shift to CBDCs. With WhiteFlo, businesses will provide a secure and user-friendly platform for accepting CBDC payments in the future, and customize the payment experience to their specific needs and branding. As CBDCs gain momentum, businesses that are ready to accept these new payment methods will have a competitive advantage.
As more countries join the CBDC movement, the need for businesses to have systems in place that can adapt to these changes will only increase. By partnering with WhiteFlo, businesses can stay ahead of the curve and provide their customers with a seamless payment experience.