Across the globe, central banks have been researching, experimenting with, and implementing central bank digital currencies (CBDCs). Recently, the number of countries exploring CBDCs has grown, with some countries in particular taking significant strides towards developing a regulatory framework where a CBDC could be viable, considering the technical limitations and requirements of a CBDC, or by simply announcing that a CBDC would form part of its government's policy framework.
We've set out below a summary of the most notable or substantive CBDC projects currently on foot.
China
It has been well reported that China have been developing a digital version of the Renminbi since at least 2014. Since then, the pace of development has been rapidly accelerating (according to government reports), with more concrete details about the scope, functionality and policy implications of China's CBDC still to come.
The People’s Bank of China (PBOC) has reportedly filed 84 patents relating to its CBDC plans, revealing that the central bank has major plans to integrate digital currency wallets into existing retail bank accounts in the short-medium term. The potential for the Chinese central bank digital currency to achieve scale from the get-go has put several other central banks worldwide on high alert.
Cambodia
The National Bank of Cambodia (NBC) has announced that it is preparing to launch a CBDC during Q1 2020. Chea Serey, NBC's director-general, said that the central bank was developing "the national payment gateway for Cambodia" as a blockchain-based, peer-to-peer platform with its own specially designed cryptocurrency. The project has long been known as "Project Bakong" and was first trialed by NBC in July of last year. The CBDC will work on a closed system supported by its banking members, with one of them being the Phnom Penh Commercial Bank (PPC Bank).
Shin Chang Moo, president of the PPC Bank, said that his bank is planning to roll out the system across all branches, as it is cheaper and more convenient. He said:
We are in the final stages of the deployment. It has taken a little longer than expected because we were ensuring that the system is as useful and convenient for the users as possible. We will offer the service as soon as it launches.
He also added that when using the CBDC, there is "zero possibility of speculation," as users will be able to set up a Bakong wallet that will be automatically linked to their bank accounts, allowing a real time fiat currency exchange into the new CBDC.
Thailand
Last year, the Bank of Thailand (BOT) announced the results of its proof of concept (PoC) for a wholesale CBDC (Project Inthanon). Wholesale CBDCs are targeted only at financial institutions. The overall conclusion was positive, eight major banks participating.
Pimolpa Suntichok, Senior EVP Commercial Banking Solutions, Siam Commercial Bank said:
The outcome of Project Inthanon has demonstrated that DLT has not only increased efficiency but also reduced risks and overall costs in the financial ecosystem
France
The Banque De France, France’s central bank, announced plans to test a digital currency as early as the first quarter of 2020. Central bank’s Governor Francois Villeroy de Galhau says the creation of a CBDC is a crucial focus, saying:
We want to start running experiments rapidly and will launch a call for projects before the end of the first quarter of 2020.
France’s central bank have even advertised for an experienced crypto-economics analyst with a solid knowledge of game theory and public or private blockchain as well as a development engineer, to work on the bank’s digital strategy and identify blockchain applications for key banking functions.
Sweden
In early 2019, Sweden’s central bank (the Riksbank) signed a deal with multinational professional services company Accenture to begin pilot testing its CBDC, the e-krona. According to reports the partnership is to last for a year-long run to the end of 2020.
A Riksbank statement added that;
The primary objective of the e-krona pilot project is to broaden the bank’s understanding of the technological possibilities for the e-krona,
The central bank began researching a digital option in 2017, as a result of cash usage beginning to decline in the Scandinavian country. The Accenture partnership involves the development of a payment platform with a user interface that enables e-krona transactions from cards and smartphones.
Turkey
As a result of the Turkish Lira experiencing a steep decline throughout 2018, Turkish President Recep Tayyip Erdogan set out plans to bolster the country's economy through the creation of the nations CBDC. Turkey’s official national publication, released a document outlining Erdogan’s plan and his directives to finish the CBDC by the end of 2020.
The document reads:
The main objective is to establish a financial sector with a strong institutional structure that can respond to the financing needs of the real sector at a low cost, offer different financial instruments to a wide investor base through reliable institutions and support Istanbul's goal of becoming an attractive global financial center
United States
While no actual CBDC is in development or been put in action, the US have remained steadfast that plans to begin developing a CBDC are underway, and surfacing to the forefront of technological innovation. United States Federal Reserve Governor Lael Bainard has recently said that the U.S. central bank is currently ‘advancing its understanding’ of central bank digital currencies (CBDCs). Speaking at a payments conference at the Stanford Graduate School of Business in California, Brainard said:
We are collaborating with other central banks as we advance our understanding of central bank digital currencies.
Brainard also said that given the dollar’s important role, it is essential the US remain on the frontier of research and policy development regarding CBDC. It is clear that the US have begun to embrace and explore a potential CBDCs centres due to the global existing popularity of electronic payments in the country, as plenty of U.S. consumers and businesses are already making electronic payments with credit and debit cards, payment apps, and through the automated clearinghouse networks.
Japan
Kozo Yamamoto, Head of the Research Commission on the Finance and Banking Systems at the Japanese Liberal Democratic Party (LDP), has urged Japan to create its own yen digital currency “within two to three years”, and include such plan in the government’s mid-year key policy guidelines.
Yamamoto said (on the proposed digital yen):
The sooner the better. We’ll draft proposals to be included in government’s policy guidelines, and hopefully make it happen in two-to-three years.
His comment was followed by a similar proposal led by former Japanese economy minister Akira Amari, who reinforced the significance in issuing a digital yen to counter China’s accelerated progress towards issuing its own digital currency.
It is abundantly clear that developments towards introducing a CBDC have shown no signs of slowing down, and will only edge closer and closer towards full implementation as the year progresses. The question we are most interested in: will Australia keep up?