In our previous article, “Overview of Central Bank Digital Currency (CBDC),” we discussed how numerous countries are developing their own versions of CBDCs. Here, we provide an update on the current status of CBDC projects worldwide.
Stages of CBDC Development
CBDC projects typically progress through three key stages: research, proof of concept, and pilot testing, followed by execution or cancellation. While central banks are increasingly interested in retail CBDCs, most projects that have advanced to the proof-of-concept or pilot stage focus on wholesale CBDCs.
Countries with CBDC Pilot and Proof-of-Concept Projects
China’s e-CNY
The People’s Bank of China reports that participants in the digital Yuan (e-CNY) have conducted trials amounting to approximately 34.5 billion yuan (US$5.3 billion). The e-CNY aims to address the changing transaction habits of Chinese consumers, particularly their preference for mobile payments, which accounted for two-thirds of total transactions in 2019. The e-CNY will be a retail token issued exclusively by the People’s Bank of China, facilitating payments for utility bills, government services, and everyday expenses like dining and shopping.
Cambodia’s Project Bakong
Launched in October 2020, Project Bakong is a digital currency initiative by the National Bank of Cambodia (NBC) that links 11 domestic commercial banks and payment processors through a distributed ledger technology (DLT) platform. NBC has also piloted digital wallets for cross-border transactions with Maybank, allowing Cambodian workers in Malaysia to transfer funds home more affordably. This initiative aims to enhance real-time interbank transactions and promote the use of Cambodian riels over US dollars.
Bahamas’ Sand Dollar
The Central Bank of the Bahamas introduced the Sand Dollar, a digital Bahamian Dollar (CBDC), to create a more secure and efficient payment system compared to traditional cash. Governor John Rolle noted that digital currency can expedite recovery in commerce following natural disasters. Sand Dollar aims to improve financial inclusion and reduce settlement times for transactions.
Korea’s E-Won
In response to South Koreans’ preference for digital payments (77%) and the country’s significant share of global cryptocurrency transactions (10%), the Bank of Korea (BOK) initiated a pilot program for the Digital Won in August 2021. This pilot is led by Ground X, a subsidiary of Kakao, which collaborates with other Kakao entities like Kakao Pay and Kakao Bank. The initial phase will involve the BOK issuing the Digital Won, while distribution will be managed through private banks.
Ukraine’s e-hryvnia
The National Bank of Ukraine began exploring the e-hryvnia in 2016, launching a pilot in 2018 on a blockchain platform. During this pilot, the NBU issued 5,443 e-hryvnias to test the CBDC’s functionality. The project, which employs a DLT framework, is still under evaluation for a potential public issuance after the pilot’s completion.
Uruguay’s e-Peso
Initiated in 2017, Uruguay’s e-Peso is designed for retail use among consumers and businesses. The Central Bank plans to distribute approximately $20 million to 10,000 users, capping individual wallets at $30,000 and business wallets at $200,000. While the e-Peso is designed to be anonymous yet traceable to prevent fraud, no further investments have been made since the pilot’s conclusion, and all e-Pesos created during that phase have been destroyed.
Sweden’s e-Krona
The e-Krona project, started by Sweden’s Riksbank in 2016, aims to replace the Swish mobile payment app with a central bank-issued digital currency. The Riksbank has conducted tests on e-wallets and distributed ledger technology, with the e-Krona expected to enhance the safety and efficiency of electronic transactions.
Canada’s CBDC Jasper
Canada is developing both wholesale (Jasper) and retail (e-dollar) CBDCs. Jasper is currently in the pilot phase, while research continues for the e-dollar. The Bank of Canada does not have immediate plans to launch a CBDC but is preparing for potential developments in the money and payments landscape.
Nigeria’s e-Naira
The Central Bank of Nigeria is focusing on enhancing efficiency in cross-border payments with its e-Naira project, collaborating with global fintech company Bitt Inc. for technical support, set to be launched later this year.
South Africa’s Khokha
Launched to evaluate the performance and scalability of DLT solutions in banking, Project Khokha is investigating the use of CBDC as electronic legal tender. The South African Reserve Bank has sought private companies to help develop CBDC infrastructure, emphasizing security against internet banking fraud.
Overall, only a handful of countries have advanced to the pilot stage of CBDC development. If successful, CBDCs could streamline transactions and facilitate cost-effective globalization of payment systems, enabling real-time cross-border transactions that mitigate risks associated with currency settlement delays.
Many nations are collaborating to create a wholesale CBDC for cross-border payments, similar to the EU Commission’s efforts to develop a CBDC for payments throughout Europe.
About Mena Advisory
Mena Advisory specializes in fintech and payments consulting, staying abreast of trends in Open Banking, cryptocurrencies, CBDCs, and blockchain technology. For more information on how we can assist in transforming your business, contact us at info@madvisory.qa.