Central bank digital currencies (CBDCs) are gaining popularity worldwide, with 134 countries representing 98% of the global economy currently exploring their digital currency options. According to research by the US-based Atlantic Council, almost half of these countries are at an advanced stage of developing CBDCs, with pioneers like China, the Bahamas, and Nigeria already seeing increased usage. The push towards digital currencies comes as cash usage declines and authorities aim to retain control over their money-printing powers amid competition from cryptocurrencies like bitcoin and tech giants.
One of the major developments in the CBDC space has been the significant increase in adoption in countries like the Bahamas, Jamaica, and Nigeria, which have already launched their digital currencies. China, which is leading the way with the largest pilot scheme, has seen a surge in the use of its prototype e-CNY, with billions of dollars in transactions. The People’s Bank of China is expected to launch its CBDC on a larger scale within the coming year. Other notable advancements include the European Central Bank’s digital euro pilot and the United States joining a cross-border CBDC project with major central banks.
While the US has been slow to embrace a digital dollar, it has recently taken steps to explore CBDCs and participate in global initiatives. However, privacy concerns and other issues have slowed progress in the US, with legislation prohibiting the direct issuance of a retail CBDC still pending in the Senate. The presidential election campaign between Donald Trump and Kamala Harris has also brought attention to the issue, highlighting the importance of digital currencies in the future of the global economy.
Following Russia’s invasion of Ukraine and the G7 sanctions, wholesale bank-to-bank CBDC projects have more than doubled in number, with the mBridge project connecting CBDCs from multiple countries including China, Thailand, the UAE, Hong Kong, and Saudi Arabia. These cross-border initiatives are expected to expand in the coming years, further integrating digital currencies into the global financial system. Russia and Iran are also working on their digital currency projects, signaling a shift towards digital payments and a move away from traditional cash transactions.
Despite the progress made by many countries in developing their digital currencies, the Federal Reserve in the US lags behind, with Lipsky pointing out that it may take years for the US to catch up to other leading central banks. As the global economy continues to evolve towards digital payments and financial systems, CBDCs are expected to play a crucial role in shaping the future of money. With the increasing adoption and use of digital currencies worldwide, it is clear that the era of traditional cash transactions is slowly coming to an end, paving the way for a new era of digital finance.
