While China is usually referred to as the most advanced country in the world when it comes to the development of its Central Bank Digital Currency (CBDC), a new report by PricewaterhouseCoopers (PwC) suggests this isn’t the case.
PwC has published the first edition of its “PwC Global CBDC Index 2021”, in which it analyses the development of CBDCs as countries around the world race to develop their own digital currency in terms of retail and Interbank CBDC
Retail CBDCs would be those held directly by citizens and corporations while Interbank CBDCs would be restricted to financial institutions for interbank payment and financial settlement processes, which could operate in a similar way to the current SWIFT system.
The second-largest professional services network in the world and one of the “Big Four” accounting firms, states in the report that it believes that, “CBDCs will contribute significantly to the modernization of the international monetary landscape, hand-in-hand with reconfiguration in both payment and financial infrastructure.”
CBDCs would be a digital version of fiat currencies inspired by the success of cryptocurrency, which they emulate in several aspects but with one major distinction: they are centralized. As such, central banks can regulate different factors like supply and usability, while also tracking all transactions made using it.
According to the report, more than 60 central banks have been exploring CBDCs since 2014, a process that has acceleration over the last years as some iterations have entered implementation phases around the world, most of them (88%) backed by blockchain technology.
Bahamas is Leading on Retail CBDC Development
The first category analyzed in the report shows that emerging economies are particularly strong when it comes to the development of retail CBDCs, with financial inclusion and digitalization being the key drivers behind the efforts.
At this time, only 2 CBDCs have been officially launched and live: Bahamas’ “Sand Dollar” and Cambodia’s “Project Bakong”. These 2 countries are leading the ranks when it comes to retail CBDC development, with China following in third place.
Mainland China’s Digital Yuan project is currently on an advanced level of development, with more than 2 billion Yuan (the equivalent of $300 million) already having being used in transactions.
There have been reports of the project being planned to be used during the Beijing 2022 winter Olympics, which could result in broader usage and test scenarios.
Other countries in this top 10 (in order of ranking) include Ukraine, Uruguay, Ecuador, Eastern Caribbean, Sweden, South Korea, and Turkey.
Interbank CBDC Development Is Another Surprise
Interbank CBDCs development, also known as Wholesale CBDCs, is the other category analyzed by PwC’s report. This type of project characterizes itself as having shorter research stages but longer pilot stages when compared to retail CBDCs. Most Interbank CBDC projects are focused
Unlike Retail CBDCs, none of these projects is live at this time despite certain pilot initiatives being in a “very advanced stage”. Most projects in this stage are focused on facilitating Cross-border payments and project interoperability.
This category is lead by Thailand and Hong Kong Sar, both tied in first place with an index value of 80. Hong Kong’s Project LionRock was launched the by Hong Kong Monetary Authority (HKMA) in 2017, which was a joint study with Bank of Thailand’s (BoT) Project Inthanon.
The joint study entered its second phase in 2021 and picked the interest of the United Arab Emirates and Mainland China, which are planning to join the initiative in the future.
While CBDCs are not cryptocurrencies, their use of blockchain technology and adoption to a mass level is sure to boost the development of the blockchain ecosystem, while also facilitating the transition from Fiat to Crypto once citizens of those countries get familiar with the concept and benefits of digital currency.
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