In March 2022, PricewaterhouseCoopers released the 2022 Global Central Bank Digital Currency (CBDC) index report, which aims to measure the maturity of central banks in developing their own digital currencies. The report is divided into two parts: the retail CBDC index and the wholesale CBDC index, which describe the progress of central bank digital currencies in the retail and wholesale fields respectively. In addition, compared with the central bank digital currency that is fully supported and developed by the national government, only the deposit part of the privately issued stablecoin is regulated by the state and included in the deposit protection scheme. Considering the reality of the coexistence of the two systems and frameworks, PwC has included a section on stablecoins overview in this report.
CBDC development status
According to the Bank for International Settlements (BIS), there are currently 3 officially launched retail CBDCs and at least 28 pilot projects, while at least 68 central banks have publicly disclosed their CBDCs. Overall, more than 80% of central banks are considering or have launched a CBDC for retail or wholesale payments.
For example, CBDCs in the Bahamas and Nigeria have been legally approved for use, and Jamaica and the Eastern Caribbean are expected to follow soon. The Central Bank of Nigeria (CBN) launched the digital currency e-Naira in October 2021, and e-Naria is expected to help Nigeria achieve its goal of increasing financial inclusion from 64% to 95%. CBN hopes to increase the use of e-Naria in the private sector and make e-Naira part of the country’s financial ecosystem. According to the Nigerian President, the good development of e-Naira could add more than $29 billion to Nigeria’s GDP over the next decade.
Meanwhile, the People’s Bank of China started the research and development of digital yuan in 2014, and China is currently conducting large-scale public pilots in some cities. e-CNY is one of three payment methods accepted by Olympic venues during the 2022 Winter Olympics. In February 2022, India’s finance minister promised to launch a virtual version of the rupee later this year; in March 2022, the Philippines announced a CBDC pilot in the country. In addition, the U.S. government also listed the design and deployment of CBDC as “the highest emergency level” in March this year, and hopes that domestic regulators will submit an assessment study report on the impact of CBDC by September 2022.
Global CBDC Index
The purpose of the index is to describe the development of CBDC in countries around the world. The main variable used to construct the index is the status of the CBDC project, that is, the stage of the development of the CBDC project. The other two variables are: 1) an indicator constructed from attitudes conveyed by speeches delivered by central banks; 2) a public benefit indicator (Google Trends or Baidu Index).
1. Retail CBDC Index
In the past few months, the development of retail CBDC projects around the world has been accelerating, and some central banks leading in CBDC development have communicated transaction data for the first time. Nigeria, the Bahamas, and mainland China rank among the top three in the retail CBDC index. In October 2021, Nigeria became the first African country to launch a CBDC – eNaira. As of December 2021, approximately 666,000 eNaira wallets have been created, 700,000 eNaira wallet applications have been downloaded, and 35,000 transactions have been made. 90% of transactions are between businesses and individuals. 160 countries have downloaded the eNaria wallet app.
Chart: Top 10 Countries/Regions by Retail CBDC Index
2. Wholesale CBDC Index
Thailand, Hong Kong and Singapore round out the top three in the wholesale CBDC index. In 2019, the Hong Kong Monetary Authority and the Bank of Thailand launched a joint project “Inthanon-LionRock” to test the application of CBDC in cross-border payments. The project demonstrates the viability of a common CBDC platform between the two jurisdictions by testing the key issues of CBDC transaction privacy, foreign exchange matching, monitoring, and compliance. In 2021, the project was renamed the “Multiple CBDC Bridge project (mBridge)”, and the BIS Innovation Center, the People’s Bank of China Digital Currency Research Institute and the United Arab Emirates Central Bank joined the project to jointly promote the real-time cross-border development of distributed ledger technology. Development of overseas foreign exchange payment.
Chart: Top 10 Countries/Regions by Wholesale CBDC Index
The future development trend of CBDC
1. Global CBDC projects will continue to grow
More than 80% of central banks are exploring CBDC development in the retail and wholesale sectors, with wholesale CBDC projects not yet reaching the same level of maturity as retail CBDCs. According to media reports, there have been many successful pilot projects around the world in the past 12 months. In 2022, the research, testing and implementation of CBDC will accelerate, especially many developing countries hope to promote the improvement of financial inclusion in their countries through retail CBDC.
2. Start focusing on user experience
In the emerging stage of CBDC, the social focus is mainly on the issuance of CBDC. At the same time, user experiences related to CBDC projects began to emerge in Nigeria, the Bahamas, and mainland China. In Nigeria and the Bahamas, all residents can use CBDC through digital wallets and payment cards. In mainland China, several large cities have offline pilot projects for CBDC, and e-CNY is also open to foreign tourists during the 2022 Winter Olympics.
3. Technical decisions need to be made
To achieve interoperability in the future, central banks will need to make decisions about the technology used by CBDCs, including ledgers, distributed ledgers and whether to incorporate blockchains. All CBDCs are traceable and their relationship to governments, businesses and individuals needs to be further clarified. Further, the relationship between CBDC and past settlement systems, and the ability to obtain corporate ESG credentials through CBDC technology should also be concerned.
Simply put, a stablecoin is a digital currency that links cryptocurrencies to fiat currencies. Stablecoins are different from Bitcoin in that they are backed to a certain extent by the state, such as the deposit part is regulated by the state and is included in the deposit protection scheme. Stablecoins have all the advantages of digital currencies such as transportability, continuous settlement, traceability, cross-border interoperability, low transaction fees and programmability relative to traditional payment infrastructure.
Stablecoins have four key characteristics: 1) Certification: The certification report is an important part of the stablecoin system, completed by certified professional service agencies, which confirms the existence of the underlying assets that support the stablecoin; 2) The nature of the reserve asset: required A range of high-quality, highly liquid assets to ensure the proper functioning of well-designed stablecoins; 3) Regulation and registration: Stablecoins and the legal entities responsible for their operations must be regulated by a strong regulatory body that must Established in a jurisdiction with mature laws and good governance to reduce the risk of financial crime; 4) Technology: The effect of stablecoins depends on how well their underlying technology is integrated with traditional non-blockchain technologies.
Currently, there are several stablecoins in the market. The chart below shows the change in market capitalization of the top ten stablecoins by market capitalization (as of March 1, 2022). The total market capitalization of stablecoins is expected to reach about $190 billion by early 2022.
Figure: Changes in the scale of the top ten stablecoins by market capitalization
In addition, the stability of stablecoin prices depends on the transparency of the operations of stablecoin suppliers and custodians holding relevant fiat deposits. For a stablecoin backed by fiat currency, the most important thing is to prove that the stablecoin is backed by fiat currency one-to-one. The fiat currency balance held in the deposit account must be equal to (or greater than) the number of stablecoins in circulation. External audits of stablecoin operators can demonstrate continued support and assurance of their stablecoins, as public audit results can further enhance confidence in stablecoins.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/pwc-2022-global-cbdc-index-and-stablecoin-overview/
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