Central Banks on Digital Currency

Digital Currency Shift: Central Banks Accelerate Push Global Economy to Embrace a Cashless Future

In a seismic shift in the currency landscape, 138 countries have shown an inclination towards digital currency. According to a survey by US-based Atlantic Council about 98% of the global economy is exploring the option of Central Bank Digital Currencies (CBDCs).

This shift is attributed to declining cash usage and the threat from cryptocurrencies and Big Tech. In an attempt to accelerate the process, pioneers are already seeing significant traction - China's e-CNY has quadrupled to $987 billion in transactions. At the same time, the Bahamas, Jamaica, and Nigeria have launched their digital currencies.

Let’s Take a Look at the Global Landscape

  • China: Always ahead of the curve, China currently leads the CBDC shift by running the world's largest pilot scheme, with e-CNY transactions nearing $1 trillion.
  • Russia: Next in the running is Russia with a Digital rouble pilot now accepted in Moscow metro and petrol stations.
  • USA: The United States is by far lagging on this revolution with only a cross-border CBDC project with six other major central banks, but still behind considering it has the world’s largest GDP.
  • Europe: The European Central Bank has launched a multi-year digital euro-pilot.
  • Iran: With only a Middle Eastern country with a digital currency plan in motion, Iran is working on a digital rial.

A Worldwide Movement of Digital Currency

In this fast-evolving financial digital space, countries are making it a mission to get on top of digitization of their currency and fastest. While a collective of 44 nations is already in the works of launching digital currency and assets, China's ambitious digital yuan project, or e-CNY, leads the pack. Ever since the launch of e-CNY, China has launched a staggering 7 trillion yuan ($987 billion) in transactions, according to Reuters. While countries like Jamaica, Bahamas and Nigeria have launched their respective digital currencies and are growing steadily.

Stagnant Growth of USA

While the USA is behind most of its peers, the US Federal Reserve has joined forces with a cross-border CBDC project including six big central banks.

In the light of challenges ahead, the US Fed has privacy concerns that have fueled debate in the US Congress. Also, a bill passed by the House of Representatives in May prohibits the direct issuance of a "retail" CBDC — the version of digital currency meant for everyday use by the public. While the Senate has yet to act, the issue has become a focal point in the 2024 US presidential election.

According to Josh Lipsky, the senior director of the Atlantic Council’s GeoEconomics Center said, "No matter what happens with the US election, the Fed is years behind. There has been a narrative that the countries that have launched CBDCs have seen low or no usage, but in the last months we have seen a real uptake. My prediction is that the PBOC (China's central bank) will be close to full launch a year from now.”

The Future of Central Banks' Digital Currency

As the digital currency landscape is growing, one thing is clear, the future of money is digital. With 44 countries piloting CBDCs and more joining the fray, the question is, who will lead the charge? Will the US catch up, or will China and other pioneers set the standard? The world is watching, and the stakes are high. However, concerns around privacy, security, and inclusion need to be addressed.