As digital payment solutions continue to gain popularity worldwide, central banks are increasingly turning their attention to the development of their own central bank digital currencies (CBDCs). CBDCs are digital representations of a country’s fiat money that can be built on a blockchain or distributed ledger, providing a secure and efficient way for people to make transactions.
With over 46 countries currently researching CBDCs, it’s clear that there’s significant global interest in this emerging technology. In this guide, we have analyzed the top 5 most promising CBDCs that have been proposed, are in proof of concept, are under trial, or have been launched.
- Chinese Central Bank CBDC – e-CNY
- Reserve Bank of India – Digital Rupee
- Monetary Authority of Singapore – Project Ubin
- Banque de France – France CBDC
- Sveriges Riksbank CBDC – e-krona
1. Chinese Central Bank CBDC (e-CNY)
The e-CNY, China’s central bank digital currency (CBDC), was announced by the People’s Bank of China in 2022 and is currently in the pilot phase. The primary goal of e-CNY is to provide a more efficient and secure retail payment system that can increase financial inclusion and preserve monetary sovereignty, while also providing backup payment infrastructure for private-sector payment solutions.
The e-CNY is designed to be a non-DLT account-based digital currency and is being developed with the support of Feitian Technologies. China hopes to have widespread domestic use of the e-CNY in place in time for the 2022 Winter Olympics in Beijing. Overall, the e-CNY is seen as an important step towards modernizing China’s payment systems and boosting financial innovation in the country.
2. Reserve Bank of India (Digital Rupee)
The Reserve Bank of India (RBI) has recently released a concept note to create awareness about central bank digital currencies (CBDCs) in general and the planned features of the digital Rupee. The RBI’s approach to introducing a digital Rupee is driven by two basic considerations: creating a digital Rupee that is as close as possible to paper currency, and managing the process of introducing the digital Rupee in a seamless manner. The RBI has launched pilots of CBDC in both wholesale and retail segments. The pilot in the wholesale segment, known as the Digital Rupee-Wholesale (e₹-W), was launched on November 1, 2022, and is limited to the settlement of secondary market transactions in government securities.
The pilot in the retail segment, known as digital Rupee-Retail (e₹-R), was launched on December 1, 2022, within a closed user group comprising participating customers and merchants. The e₹-R is a digital token that represents legal tender and is issued in the same denominations as paper currency and coins. It is being distributed through financial intermediaries, and users can transact with it through a digital wallet offered by participating banks. The RBI is expanding the scope of the pilots gradually to include more banks, users, and locations based on feedback received during the trials.
3. Monetary Authority of Singapore (Project Ubin)
The Monetary Authority of Singapore (MAS) has launched Ubin+, an expanded collaboration with international partners on cross-border foreign exchange (FX) settlement using wholesale central bank digital currency (CBDC). Ubin+ aims to study business models and governance structures for cross-border FX settlement, develop technical standards and infrastructure to support cross-border connectivity and establish policy guidelines for better access and participation. The initiative builds on the foundation started with Project Ubin (2016-2020) and learnings from MAS’ participation in Project Dunbar.
As part of Ubin+, MAS is undertaking several projects with international partners, including exploring interoperability between DLT and non-DLT payment systems, connectivity across heterogeneous digital currency networks, and foreign exchange and liquidity management through Project Mariana, a partnership involving MAS, Banque de France, Swiss National Bank, and the Bank for International Settlements Innovation Hub’s Eurosystem, Switzerland, and Singapore Centres. Ubin+ aims to strengthen Singapore’s capabilities to use digital currency-based infrastructure for cross-border transactions and accelerate central banks’ collective progress to an optimal future state of digital infrastructures.
4. Banque de France (France CBDC)
Banque de France is actively developing a wholesale central bank digital currency (CBDC) that could be used to streamline domestic and cross-border transactions between banks. In March 2020, the bank began experimenting with a wholesale CBDC, which completed its first stage in December 2021. The second phase of experimentation kicked off in the second half of 2022 and aims to bring central bank money as a settlement asset as early as mid-2023.
Banque de France is increasingly exploring CBDCs built on distributed ledger technology (DLT) and is working with private sector partners and other public actors. Unlike retail CBDCs, which are issued directly by central banks to citizens, wholesale CBDCs are issued only to banks.
5. Sveriges Riksbank CBDC (e-krona)
Sveriges Riksbank, the central bank of Sweden, is exploring the possibility of issuing a digital version of the Swedish krona, known as the e-krona. This would provide an alternative to physical cash and complement privately issued digital money, such as electronic deposits and payments made through banks. The e-krona would preserve the functions of cash, such as the ability to exchange every krona regardless of which bank it is in, and strengthen the resilience of the payments market by providing an alternative payment infrastructure.
The Riksbank believes that issuing an e-krona could make it easier for smaller and new agents to develop innovative payment solutions and products. Providing state money in digital form is an important task of the Riksbank in ensuring safe and efficient payments in the digital age.
How will CBDCs Affect Commercial Banks?
The introduction of CBDCs is expected to have a significant impact on the banking industry, including commercial banks. One of the potential impacts of CBDCs on commercial banks is that they may reduce the demand for traditional bank deposits, as people may choose to hold their money directly in a CBDC wallet instead of a bank account. This could lead to a decrease in the number of funds that banks have available for lending, which could in turn affect their profitability.
However, some experts believe that CBDCs could also provide new opportunities for commercial banks. For example, banks could offer value-added services such as integration with existing payment systems or the ability to earn interest on CBDC holdings. It’s worth noting that many commercial banks have already embraced digital assets, with over 500 major private banks allowing investors to transact with cryptocurrencies through third-party exchanges.
Does the USA have a CBDC?
The United States does not currently have a Central Bank Digital Currency (CBDC). However, the Federal Reserve has been exploring the idea and key members have stated that they are in the process of researching the impacts of a CBDC with their Globally Systemically Important Banks (G-SIBS) such as Chase, Bank of America, and others. The development and implementation of a CBDC in the US will depend on the outcomes of this research and the strategic decisions made by the Federal Reserve and other stakeholders.
Final Thoughts
As digital payment solutions continue to grow in popularity, central banks worldwide are exploring the development of their own Central Bank Digital Currencies (CBDCs). CBDCs are digital representations of a country’s fiat money, designed to provide secure and efficient ways for people to make transactions. This article highlights five of the most promising CBDCs in the world, including e-CNY, Digital Rupee, Project Ubin, France CBDC, and e-krona.
While the introduction of CBDCs could impact commercial banks by reducing the demand for traditional bank deposits, there are also opportunities for banks to offer value-added services. As digital assets continue to gain momentum, it is likely that more central banks will consider issuing CBDCs to modernize payment systems and increase financial inclusion.
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