Small retail central bank digital currency research and development countries are actually at the forefront

For central banks that are still struggling whether their country’s digital currency is for wholesale or retail, the Bahamas and Eastern Caribbean countries in the Caribbean have taken the lead in taking the lead in retailing.

A survey conducted by the Bank for International Settlements shows that the number of central banks that choose retail central bank digital currency research and development paths is gradually increasing, and the relevant emerging economies have also taken the lead in achieving certain progress and are at the forefront of retail central bank digital currency research and development.

The world’s first official central bank digital currency is the Sand Dollar launched in October 2020 by the Caribbean country Bahamas. The retail central bank digital currency is issued by a financial institution authorized by the Bahamas Central Bank. Bahamian citizens can use the central bank’s digital currency to complete consumption at domestic merchants with the help of electronic wallets designated by the central bank on their mobile devices.

In April this year, the Eastern Caribbean Central Bank also officially launched a retail central bank number called DCash, which can realize cross-border purchases of goods and services in Grenada and Saint Lucia.

Retail central bank digital currency research and development is popular

Xu Zhong, vice president of the China Interbank Market Dealers Association, pointed out in the book “FinTech: Frontiers and Trends”, “As the central bank’s digital currency design plan gradually reaches consensus on some key issues, the central bank’s digital currency project needs to make The most important choice is whether to give priority to wholesale or retail. This choice will determine the target application scenario, design and development path, and implementation strategy of the central bank’s digital currency.”

To put it simply, the use of wholesale central bank digital currencies is limited to the central bank and financial institutions, not open to the public; while the retail type is also called general purpose (General Purpose), and its use is open to the public.

According to previous surveys conducted by the Bank for International Settlements, between 2018 and 2020, among 66 central banks in the world (21 advanced economies and 44 emerging economies), the proportion of central banks that develop retail central bank digital currencies has risen to About 35%, while the proportion of R&D wholesale type has dropped significantly, only about 10% in 2020. Although the number of central banks that balance the two has declined slightly, their proportion is still over 50%.

In terms of specific projects, some take the retail type as the first, such as the Sand Dollar launched by the Bahamas and Sweden’s e-Krona (e-Krona) in the second phase of the pilot; there are also the wholesale type as the first, such as the LionRock of the Hong Kong Monetary Authority. Projects, the Ubin project of the Monetary Authority of Singapore, the Stella project jointly developed by the European Central Bank and the Bank of Japan, etc.

China is a combination of both. On the one hand, it has launched digital RMB pilot projects in some cities, mainly testing the use of retail end; on the other hand, it is also exploring applications in the wholesale field, such as joint research with the Bank for International Settlements, the Hong Kong Monetary Authority, and the Bank of Thailand. The application of cross-border transactions.

Xu Zhong believes that the main goal of the central bank to develop retail central bank digital currency is to use the openness of the central bank’s digital currency system to promote financial inclusion. The relationship between retail central bank digital currency and cash usage is more subtle. More and less use of cash will increase the necessity of retail central bank digital currencies.

According to industry insiders, in the view of some central banks, central bank digital currency may not only be a digital native version of traditional currencies, but should also be regarded as a programmable currency tool that affects monetary and social policies. If its use can be restricted In a certain field, specific occasion or time period, take public transportation as an example to combine the use of digital currency with green and low-carbon travel.

The popularization and promotion of digital currency still takes time

The pilot promotion of the central bank’s digital currency is not smooth. Japan’s central bank digital currency entered the proof-of-concept stage in April this year, but according to the September quarterly survey by the Bank of Japan, 75.7% of the households surveyed said they had never heard of the central bank’s digital currency.

An earlier lesson learned is Ecuador in South America, which launched a central bank digital currency pilot project called “DE” in 2014, but it ended in 2018 due to the low utilization rate of the public and merchants.

Some research papers have pointed out that the case of Ecuador shows that the implementation of central bank digital currency is not easy. It not only requires the establishment of a website or online payment system to open deposit accounts for the public and enterprises, but also provides a set of services to thousands of merchants. Deposit/transfer mechanism and equipment with a high degree of software and hardware convenience.

As a new thing, the retail central bank digital currency will inevitably produce multiple frictional costs in the process of integrating into the existing financial ecology. How to minimize the potential friction cost and successfully achieve a “soft landing” has become an issue of great concern to all countries.

Cheng Shi, chief economist of ICBC International, believes that in addition to optimizing its own basic performance, the central bank’s digital currency needs to pay more attention to the evolution in three directions, namely to become an alternative and a better one. And harmless new currency solutions.

In his view, first of all, the central bank digital currency is not to be overthrown and reconstructed. It needs to coexist with the existing payment system as a creative supplement to promote the establishment of consistent payment standards. Users provide a better payment experience that protects privacy, is safe and reliable.

He also suggested that the central bank’s digital currency should not pursue expansion in quantity and scale, but pay more attention to the penetration and change of usage habits, and guide the focus of Internet finance to return to the traditional financial system.

Part of the central bank’s digital currency research and development progress

May

Sweden

Start the second phase of testing (or continue until 2026)

June

Israel

Open test

July

European Central Bank

“Digital Euro” enters a two-year research phase

August-December

South Korea

Will start the first phase of testing

July

European Central Bank

“Digital Euro” starts a two-year research phase

September

Turkey

“Digital Lira” cooperation platform was formally established

October

Nigeria

Postpone the release plan of “Electronic Naira” on October 1st

October

America

The “Digital Dollar” report will be released soon

2022

Russia

“Digital Ruble” will start the test

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/small-retail-central-bank-digital-currency-research-and-development-countries-are-actually-at-the-forefront/
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