National cryptocurrencies – an expensive trial and error

We started talking about government projects to introduce their own cryptocurrencies in the article “National digital currencies – the money of the future?”. And today we continue our story about the successful and failed experience of issuing digital currencies by various countries of the world. So let’s go!

Japan

The Bank of Japan is not yet ready to announce the timing of implementation digital yen. At the same time, in the summer of 2020, a special expert commission was created, headed by the former Minister of Economy of Japan, Akira Amari. The purpose of this body was a thorough study of CBDC, technical and legal obstacles to its integration into the country’s existing financial system. Logically, the introduction of the digital yen into circulation should be the final stage of the commission’s work.

It is known that earlier the Bank of Japan joined the group of regulators (combining the Central Bank of the EU, England, Sweden, Switzerland and Canada), created to coordinate CBDC research. The country’s central bank sees digital currency as an accelerator of digitalization, because in Japan, more than 80% of all retail payments are still made in cash.

Bahamas

The Central Bank of the Bahamas announced the start of practical testing of the digital currency in August this year. For initial implementation sand dollar – the electronic currency of this state – the Exum archipelago is selected. So far, the audience of CBDC users covers just over 2,000 people. Several shops are involved, and 48,000 electronic “coins” are issued into circulation.

The Central Bank hopes in this way to improve the financial system of the Bahamas. The regulator has the right to issue digital currency, monitors transactions, pays for the creation and operation of the KYC / AML system on the territory of the state. In turn, financial institutions – after obtaining the appropriate license – can develop various online and mobile services for the sand dollar infrastructure.

During pilot testing, the Central Bank hopes to finalize the technical part of the project and eliminate the identified shortcomings. Particular attention is paid to network security and the issues of financial regulation of digital currency.

Kazakhstan

In the summer of 2020, Kazakhstan also announced the creation of an electronic national currency. The purpose of the introduction e-tengeFirst of all, there was a need to eradicate corruption. Digital money should reduce the volume of paper money, mainly used for bribes, as well as increase the transparency of public procurement for public funds.

The main concerns of the regulator are caused by uncertainty about how much the introduction of the state cryptocurrency can affect financial stability and inflation in the country.

Great Britain

The head of the Central Bank of Great Britain, Andrew Bailey, in July 2020 announced the regulator’s plans to create digital pound sterling. True, so far only the declarative part of this idea has been made public, and the British plan to move to it in practice after the end of the COVID-19 pandemic.

The Central Bank is confident in the future prospects of its own CBDC and is determined to complete the project for its development and release in a few years. Currently, the Bank of England is part of a group of central banks that have joined forces to study the practical use of state digital currencies.

USA

The US Federal Reserve announced the launch of testing in August 2020 e-dollar on independent blockchain platforms. The impact of DLT technology and CBDC on the US financial system will be studied by a kind of consortia – representatives of the MIT Institute of Technology and the Federal Reserve Banks of Boston, Dallas, Cleveland, New York. In the context of the pandemic, the question arose of building a payment system capable of meeting the needs of all citizens of the country during quarantine.

Fed board member Lael Brainard agrees with the thesis that CBDC has many advantages over fiat currencies, but is not without some disadvantages. The main questions for the state cryptocurrency boil down to its potentially negative impact on financial stability. The issue of laundering proceeds from crime has not been removed from the agenda either.

It is known that a month earlier, the Senate discussed issues related to the release and circulation of CBDC. The senators came to the conclusion that the rejection of the e-dollar poses a threat to the international dominance of the US state currency. They noted that the integration of state digital currencies into the economies of countries is a matter of time. Therefore, the United States must become a leader in this area.

At the same time, the senators noted that without thorough testing it is impossible to determine how serious a threat the CBDC issue poses to the stability of the state’s financial system. The availability of digital currency for every American is also questionable, because according to statistics, about 20% of the country’s inhabitants do not have smartphones or access to high-speed Internet.

France

In May 2020, the Central Bank of France announced the ongoing testing digital euro. The results of this experiment are currently being processed. As noted in the Central Bank, the French regulator conducted testing as part of the program of EU central banks to study the implementation of CBDC.

In the meantime, this financial body does not plan further work with practical experiments on the state cryptocurrency or its implementation in the near future. The appearance of the digital euro should be expected not earlier than in a few years, provided that its necessity for the development of the financial system is convincingly proven.

Thailand

In early summer 2020, the Central Bank of Thailand announced the launch of a special platform for the state cryptocurrency. With its help, a business will be able to get acquainted with the benefits of CBDC and integrate digital baht in their financial activities.

According to the regulator’s calculations, the state cryptocurrency will accelerate the digitalization of the country and increase the competitiveness of its economy in the world market. At the same time, the Central Bank is ready to issue licenses for the use of CBDC not only to banks, but also to the corporate sector. It is planned that the analysis of the platform will be delayed until the end of the year, and then the regulator will publicly report on the results.

At the same time, the Central Bank of Thailand, together with the Monetary Authority of Hong Kong, completed a series of experiments on the use of CBDC for cross-border payments at the beginning of 2020. Then the regulators talked about the successful conduct of direct interbank transactions without the involvement of intermediaries.

South Korea

In response to the rapid development of the digital state currency in China and the ongoing global pandemic, the Central Bank of South Korea has stepped up research in the field of implementation e-won. By the end of this year, it is planned to begin practical testing of the state cryptocurrency. The regulator expects that CBDC will increase the efficiency of payments, facilitate the monitoring of transfers, and accelerate the introduction of DLT technologies, AI and Big Data in the country’s economy.

It is curious that, as part of the study of the digital currency, the Central Bank of South Korea decided to subsidize the citizens of the country in e-won – for the duration of the quarantine. Local authorities issue special crypto wallet cards to residents, on which benefits are accrued. And the business, in turn, installed terminals for accepting payments in public crypto-money.

Prospects for the development of CBDC

One thing is clear: many countries take the issues of integrating state digital currencies into the national financial system as seriously as possible. Yes, it is still difficult to call the current situation with CBDC unequivocally in the direction of accepting or rejecting the introduction of this form of money.

It is much more appropriate to talk about cautious optimism – most regulators understand the prospects for CBDCs for the economy, but at the same time, there is a lack of research on their impact on the current financial system. Therefore, the Central Bank, for the most part, is not yet ready to name specific dates for the launch of digital state currencies in their countries.

2020 has been a year of research and pilot projects to study the impact of CBDCs on the economy. This is the year of searching for new and effective solutions for the secure integration of cryptocurrencies into the established international financial market. The example of China allows us to hope that other countries will compete with this state in terms of the pace of implementation and development of domestic cryptocurrencies of national banks.