Although development hasn’t quite ramped up due to scope, central bank digital currencies (CBDCs) are making the rounds quite nicely. Countries are looking toward a future where citizens access their currencies more freely, opening a more financially inclusive world.
Last month, the International Monetary Fund (IMF) noted that over 100 countries have picked up the pace and are looking toward CBDC development. This marks a significant development from last year, when only a handful had committed to the vision.
Everyone’s Going Digital
Speaking at a virtual event, Kristalina Georgieva, the IMF’s managing director, explained that the agency’s aim for CBDCs is to examine them from a macroeconomic perspective. She explained that CBDCs offer the best of both worlds: they allow people to enjoy seamless and quick transactions that are backed by governments.
Georgieva added that the IMF had conducted a survey of its members and found at least 110 countries that are at some stage of CBDC development. As she pointed out, this is an encouraging trend, especially with the currencies’ ability to fill several financial gaps in traditional economies and improve overall efficiency.
Movement toward CBDCs is not a new thing. Since last year, there has been an ever-growing trend of nations looking to digitize their currencies. Many believe this will drive economic growth and improve inclusion. At the same time, the coronavirus pandemic led to notable growth in the push for digital forms of payments. Countries want to capitalize on this, hence the growth in CBDC development.
Examining Recent CBDC News
Despite the impressive numbers, only a few notable countries have launched their CBDCs. The Nigerian government unveiled its eNaira CBDC last month, promising massive benefits for the asset. According to Godwin Emefiele, the Governor of the Central Bank of Nigeria, President Muhammadu Buhari anticipates an increase of $29 billion in economic activity compared to last decade due to the eNaira’s infusion into the country.
According to local news sources, the Emelfiels pointed out that the government could initiate welfare programs using the eNaira. He said over 120 merchants, 33 banks, and thousands of customers have already signed up for the asset. The central bank has issued over 200 million eNaira units (worth about $605,000) since the coin launched.
One of Nigeria’s closest neighbors, Ghana, is also moving ahead quickly with its CBDC project called the e-cedi. Last month at an economic forum, Kwame Oppong, head of fintech and innovation at the Bank of Ghana (BoG), said the institution is looking to incorporate offline transactions in the e-cedi.
According to Oppong, offline transactions will allow citizens in the most remote parts of Ghana, who lack stable power supply and access to the internet, to use the e-cedi. Data from the World Bank shows that, as of 2019, only 84 percent of Ghanaians had access to stable electricity. Internet penetration in the country was only 53 percent. With offline functionality, even people in the most remote parts of Ghana will have coverage.
More Development from the East
Offline functionality was a major stipulation for Japan as it looked to build the proof of concept for its CBDC last year. The country, notorious for earthquakes and other natural disasters, believed offline functionality would ensure people who get hit with these disasters remain connected to the proper financial infrastructure.
Moving forward, Japan is considering something else: seamless integration. Reuters recently reported that Shinichi Uchida, an executive of the Bank of Japan (BOJ), explained in a speech the institution’s goal of making the upcoming digital yen as simple as possible.
Ichida explained that vertical integration for the CBDC within the private sector payment ecosystem would require the CBDC itself to be as simple as possible. The BOJ wants to ensure citizens can use the CBDC and other electronic payment services from the same digital wallet. This way, switching between the two channels is as easy as possible.
For now, China continues to lead the world in CBDC development. Work on the digital yuan has been ongoing for the past year, and more people have been integrated into the asset’s ecosystem already.
Mu Changchun, the head of the Digital Currency Institute at the Peoples’ Bank of China, said at the recent Hong Kong FinTech Week that over 140 million individual digital yuan accounts had been created. At the same time, 10 million corporate entities have created accounts for the asset.
Reuters reported that people had spent almost $10 billion using digital yuan wallets as of October 2021. A launch date for the asset is yet to be announced, but the rollout has been steady, to say the least.