The number of countries working on Central Bank Digital Currencies (CBDC) is increasing. Half the world is now preparing for CBDC adoption. According to a recent report by the U.S. think tank the Atlantic Council, 114 countries are currently looking into digital central bank money – an increase of 280% compared to May 2020, when “only” 30 countries were looking into CBDC.
The report notes that 46% of countries are at least in a testing or development phase. Only Ecuador and Senegal have shelved projects for their digital central bank currency. The People’s Republic of China is considered a pioneer in CBDC development. Beijing is currently testing the digital renminbi (e-RMB) to nearly 260 million people. In addition, CBDCs are already in use in eleven countries – primarily in Caribbean states such as the Bahamas and Jamaica.
The U.S. FED launched a wholesale experiment last November. The European Union commissioned Amazon, among others, to develop a prototype for a digital euro. In addition, the Atlantic Council report says that nearly every G20 country has made “significant progress” in the past six months.
The benefits of digital central bank currencies are apparent. They can facilitate cross-border payments and generally drive the inclusion of citizens from regions with weak financial infrastructure. Still, the Atlantic Council sees several challenges associated with a broad rollout of digital central bank currencies.
The emergence of various CBDCs may affect the overall geopolitical power imbalance. For example, sanctions could be more easily circumvented. The Russians have been working flat out on introducing a digital ruble since the start of the war. It should be ready by 2024.