Central Bank Digital Currencies (CBDCs) were one of the stars of the crypto space throughout 2020. Several countries committed to digitizing their currencies, with most of them hoping to enable quicker and more effective digital payments across the board. The strategy seemed simple on the surface, but many countries have also had problems making the seamless leap into digital assets.
In 2021, the race for a CBDC remains strong, and several other nations have also committed to similar projects. With that in mind, it's worth looking at each prominent country and how much progress they have managed to make so far.
China has always been the leader in the race for a CBDC. The country's progress with the projects is laudable, to say the least, and there is hardly a probability that any other nation will beat it to the punch.
Last year, the Chinese government launched trials for its digital yuan in four regions - Shenzhen, Suzhou, Xiong'an, and Chengdu. Most of these trials came in the form of lotteries, with citizens receiving digital yuan units and having to spend them at select stores across the country.
In 2021, the country has ramped up preparations for its digital yuan significantly. In January, reports confirmed that 100,000 citizens in Shenzhen received up to $31 million in the digital yuan via a lottery. They were also able to convert these assets to cash via tests at select ATMs across the region.
The Postal Savings Bank of China has also developed physical wallet cards for citizens to store the digital yuan. According to reports, the initiative will make the digital yuan especially useful for the elderly, who might not be comfortable using digital assets.
The country's most recent tests include trials at the New World Daimaru Department Store and New World City - two major retail locations in Shanghai. Per a report from local news sources, these stores handled thousands of transactions in the digital yuan across the past month as part of a sales campaign set to promote International Women's Day.
Along with the department stores, major baking institutions such as the China Construction Bank and Bank of Communications participated in the trial. They provided retailers with virtual coupons to reward customers who used the digital yuan for transactions.
So far, there is still no date for China's digital yuan rollout. However, with advanced tests now on the way, anything indeed can happen.
At some point, Russia had a reputation for being a major economy that seemed not to care about cryptocurrencies at all. The country had no laws in place to regulate the crypto space, and its government wasn't overly concerned about digital assets to begin with.
All of that changed last year when the government passed On Digital Financial Assets, its first crypto regulatory bill. Russia has been on a significant adjustment spree since then, but it is now evident that the country at least takes the subject of cryptocurrencies more seriously.
Now, Russia's crypto enthusiasm has also extended to CBDCs. This month, local news sources confirmed that the Bank of Russia plans to begin pilots for its CBDC by the end of 2021. Deputy Governor Alexey Zabotkin explained that the bank plans to complete a prototype of its assets by the year's end, and extensive tests should begin by next year.
As Zabotkin explained, the prototype won't support actual transactions. However, it would serve as a starting point for the bank to build its CBDC ecosystem. All trials will be rolled out based on the prototype, and the bank hopes to achieve some positive results soon enough.
In late 2020, the Bank of Russia announced its CBDC plans via a consultation paper on the digital ruble development. In late February, Olga Skorobogatova, a Deputy Governor at the bank, also reportedly announced that the bank had selected a model for the CBDC to operate on.
Like China, Japan's government has also been working hard towards a CBDC. The country began developing its assets after fears of what China's digital yuan could do to the global economy. Since last year, it has been working hard to get a CBDC system going and bolster its ecosystem.
Last week, Bank of Japan Governor Kuroda Haruhiko said that the institution would take a measured approach towards developing its CBDC. He explained that while the bank still doesn't have a concrete plan for issuing a state-backed asset, it has been working on research and development for the past year and is moving fast towards developing a proof-of-concept.
As Haruhiko confirmed, the Bank of Japan hopes to begin testing variants of its digital yen by this spring. Citing statistics from the Bank of International Settlements, the policymaker explained that 86 percent of all central banks are exploring the possible benefits and drawbacks of CBDCs. Of this number, 60 percent are already running experiments. With everyone understanding the significant role of CBDCs in the global economy's future, Japan hopes to fast-track its CBDC's development significantly in the future.
No Word Yet from the United States
With several leading economies moving quickly towards CBDCs, it is worth asking what the United States has been doing all this while. The U.S. government has been essentially shy about CBDC development, with the country facing more pressing economic issues, primarily stemming from the coronavirus.
Many hope that the Biden administration will give CBDCs more of a focus as we advance. However, for now, there hasn't been much talk on that front. Considering how quickly the U.S. government can move when it comes to projects, however, nothing is out of the question just yet.