Anyone familiar with crypto will know that CBDCs are the latest craze with governments. They might not necessarily be into the idea of making cryptocurrencies legal and accepting these assets. Still, CBDCs are definitely popping up on their minds as they look to take advantage of the latest financial craze.
For now, countries like China and Japan are leading the charge as they work hard towards building their state-backed assets. However, this year has seen many countries move into the space and hope to build CBDCs of their own.
Big News for May
The first major economy to throw its hat into the ring this year was South Korea. Last month, the Bank of Korea began actively looking for partners on its CBDC project, according to a Reuters report. The report explained that the Bank of Korea had launched a bidding process to choose a tech partner on its CBDC project.
The partnership will focus primarily on studying the feasibility of launching a CBDC in a testing environment. The Bank of Korea strongly believes that changes in the global economy are now favoring digital assets, and it is looking to stay competitive.
A pilot program for the South Korean CBDC is expected to come in August and run until December. There is the potential of extending it to next year, but that isn’t set in stone yet.
The next week, it was the Bank of Indonesia’s turn. The country, which banned crypto payments back in 2017, confirmed that it was looking to develop a CBDC of its own. Reuters reported that Perry Warjiyo, the Bank Governor, confirmed the news. Indonesia’s CBDC will focus on facilitating payments across the country, and the Bank of Indonesia will hope to regulate it in the same manner as card and cash transactions.
Warjiyo added that the Bank is currently looking into the potential benefits of launching a CBDC, the asset’s possible impacts on payments and monetary policy, and the asset’s compatibility with the country’s current infrastructure. The Bank is also looking into possible technology options to build the asset from the ground up.
There is no timeline for the asset’s development yet, but progress definitely looks promising.
More Countries Pile On In June
Moving into June, Hong Kong stepped into the race. In an official press release, the Hong Kong Monetary Authority (HKMA) outlined some of the steps it will be looking to take as it hopes to turn Hong Kong into a fintech hub by 2025. Among the many strategies include the development of a CBDC.
Unveiling the strategy, the regulator explained that a CBDC will play a part in the government’s mission to promote the adoption of digital finance by the target year. The agency is now looking to research more into CBDCs and increase its readiness to adopt one.
The HKMA will collaborate with the Bank for International Settlements (BIS) to research a retail CBDC. This research will focus on the risks, benefits, and use cases of the asset. The HKMA will also work with the Chinese government to ensure easy interoperability of their respective CBDCs.
Israel became the latest country to put its hat into the ring as the Bank of Israel announced earlier this week that CBDC plans are underway. A report from the Jerusalem Post confirmed that Andrew Abir, the Deputy Governor of the Bank of Israel, claimed that they were working on a digital shekel that would look to improve financial inclusion in the country.
Speaking at a conference of the Fair Value Forum of IDC Herzliya, Abir claimed that he wasn't promising a CBDC anytime soon. However, a pilot test for the asset is indeed underway.
“I had previously estimated that the chance of having a CBDC within five years is 20%. My estimate has increased a bit in the last year, mainly because other countries are advancing with it too, but still there is less than a 50% chance,” Abir added.
For now, the Bank of Israel hasn’t made any announcements about a digital shekel. But, the institution has confirmed that it is looking into an action plan that will see it explore the benefits of a CBDC.
Africa Isn’t Lagging Behind
Interestingly enough, the revolution has hit Africa as well. This year, Nigeria, South Africa, and Ghana - three of the continent's largest economies - have confirmed plans to launch CBDC pilot programs before the year runs out.
Africa remains the continent with the lowest levels of technological penetration and financial inclusion. While there are challenges to be surmounted, a CBDC will definitely help to improve financial inclusion on the continent.
Most governments would be looking to the giants to test CBDCs before moving ahead with their programs. It is understandable, of course, although this also means that the countries committing to CBDC projects will have to take it seriously if they hope to join the rest of the world in financial evolution.