Русский
An Atlantic Council study published on Thursday showed that 134 countries, or 98% of the global Gross Domestic Product (GDP), are currently exploring the launch of a central bank digital currency (CBDC). This number has surged from just 35 since May 2020. The development is significant as it seems to predict an almost universal move away from the US dollar.
Currently, 68 countries are in advanced stages of exploration, which includes development, pilot, and launch phases. All five BRICS nations, Brazil, Russia, India, China, and South Africa are in advanced stages, while Australia, Japan, South Korea and Turkiye, are all at trial stage.
In contrast, advancements in a retail CBDC have halted in the United States. The Federal Reserve Chair Jerome Powell recently conveyed to the Senate Banking Committee that the Fed currently has no immediate intentions to introduce such a currency in the US. “People don’t need to worry about a central bank digital currency. Nothing like that is remotely close to happening anytime soon,” he said.
Lawmakers have expressed concerns about US citizens’ privacy, which has hindered efforts to introduce the digital dollar. Curiously the use of the US dollar as a global reserve currency has also hindered its suitability as a CBDC. It is far too complex to introduce such a currency mechanism into the global markets, a problem that also exists for the Euro.
China’s Digital Yuan (e-CNY) stands out as the largest CBDC pilot globally. With its widespread adoption, the e-CNY has reached 260 million wallets across 25 cities in the country.
As of now, only three countries have successfully launched a CBDC: the Bahamas, Jamaica, and Nigeria. The Eastern Caribbean Currency Union, comprising 8 countries, encountered technical issues with its DCash initiative and consequently suspended its availability. The union is now in the process of developing a new pilot program.
While Brazil, Russia, India, China, and South Africa are still in the pilot phase of development, new BRICS members such as Saudi Arabia, Iran, and the UAE are also investigating cross-border wholesale CBDCs. Notably, BRICS has been actively promoting the development of an alternative payment system to the dollar since last year. There has been a notable increase in wholesale CBDC developments involving BRICS nations. Currently, 13 cross-border wholesale CBDC projects are underway, with mBridge, which links China, Thailand, the UAE, and Hong Kong, is set to enter a new phase, expanding to a further 11 additional countries during 2024.
CBDCs as an alternative to fiat currencies are a bit of a misnomer as the basic reasoning behind CBDCs is that they are 100% reflective of each of their traditional centralized fiat currencies, only expressed in digital format. There are theoretical advantages in trading through the use of CBDCs insofar as there are fewer regulatory gates established at this time. Nonetheless, all central banks in every country that eventually releases a representative CBDC cannot allow it to operate on global markets in a decentralized and uncontrolled manner, like Ethereum or Bitcoin, or their offshoot non-centralized stablecoins. The central banks still retain the right to add or discard zeroes in their currency’s value, be they CBDC or not.
This is one of the key reasons decentralized Cryptocurrencies such as those that are ETH or BTC-based have an advantage over fiat and CBDCs over the long term, and why there is so much traditional resistance to them among governments and central banks worldwide.
There are valid reasons, despite politicization, debt degradation, and devaluation of the US Dollar, that it is still the most utilized currency in the world. It possesses the historically evolved depth of its many derivatives and instruments, the sheer variety of liquid choices to pick from with the USD in global markets. Therefore, despite the hype, it will be a difficult path say for BRICS, even with each of the sovereign countries represented issuing their CBDCs to achieve significant traction.
One possible way would be to negotiate within the BRIC member nations a single, unified CBDC that is buttressed by the security assurances of the underlying countries, preferably partially backed with relevant commodities such as oil, gold, or similar, with an undertaking to allow free and unencumbered trade and remain unpoliticized. While this may sound improbable, this solution may well enable the formation of the needed alternative depth and liquidity needed to claim a share of the global currency market away from the USD.
