Central banks all over the world have been looking into the feasibility of creating their own digital currencies.
According to the IMF, nearly 100 countries are actively evaluating CBDCs.
Counties like the US, the UK, China, India, and Japan are leading the race.
In order to be more accommodating to the industry, a few governments' current cryptocurrency regulations are being relaxed.
The government's central banks are heavily focused on the launch of CBDCs test programs as soon as possible to advance their payment structure. CBDCs are basically digital representations of a country's government-issued, central bank-controlled money.
Not all countries are in the pilot phase of their CBDC, some countries, like the Bahamas, Jamaica, Eastern Caribean Islands, and Nigeria, have already issued their CBDC. These countries launch the retail version of CBDCs in the real market.
However, some countries' CBDCs, like the US, UK, China, Japan, and India, are still in the early stages of the pilot program. Let's take a look at their current CBDC status;
Asian countries appear to be more advanced in their CBDC-related projects. On November 1, 2022, India launched a wholesale CBDC pilot to ease interbank settlements, with plans for a retail currency to follow. The Indian CBDC is currently in the development phase and the central bank will soon launch its pilot programs.
The next in the line is China, which already launched several pilot programs and is currently testing both retail and wholesale versions of its CBDC. It has already processed $13.9 billion in digital e-CNY transactions.
Japan, the third Asian nation leading the CBDC race, is also in the development phase, with plans to launch pilot programs in the spring of 2023. The Bank of Japan will collaborate closely with banks and other organizations to identify any deposits and withdrawal issues. The central bank will also assess whether it can operate without interruption during a natural disaster or when there is no internet access.
However, there is still some catching up to be done by the U.S., and the U.K. Meanwhile, the Federal Reserve of the United States is running a 12-week CBDC proof-of-concept program in collaboration with several large financial institutions, including Mastercard, HSBC, Citigroup, and Wells Fargo.
At the same time, the Bank of England has formed a task force to oversee the use cases and operations of a CBDC but has yet to make a formal decision. It was initially promoted by former chancellor Rishi Sunak, who is now the Prime Minister of the United Kingdom.
Not just these five countries, but many more are in the pilot and development stages of launching their retail and wholesale versions of CBDC. So, why are governments focusing more on CBDCs? What does the future hold for CBDC?
CBDC will undoubtedly have a bright future due to its numerous real-world applications, such as the potential to improve payment structures, reduce transaction time and costs, drive financial inclusion, and simplify cross-border transactions.
Another factor that makes CBDCs the government's top priority is that it is a centralized digital asset that will be effectively regulated by the respected government. In the times to come, governments will introduce regulations to better regulate their CBDCs.
Which of the top five nations, in your opinion, will be the first to establish a legal framework for its CBDC? Share your views in the comment section below.