The Central Bank Digital Currencies (CBDCs) are getting much public attention in 2020, leaving behind Bitcoin and Facebook’s Libra compared to the past years.
Possibly, the credit can assume for the People Bank of China when it forthrightly announced in Jan. 2020, about the plans of replacing cash in circulation with that of its central bank digital currency (CBDC) or Digital Currency Electronic Payment (DC/EP), which is now being in a piloted mode in four cities in China.
However, China’s CBDC and Facebook’s Libra are not only the momentum behind this mounting interest. The latest report was published on Aug. 24, by the Bank for International Settlements (BIS) via working paper no. 880 through various central banker’s speeches, central banks’ websites, and with the help of investigation on economic and institutional drivers of global CBDC development mentioned that the Covid-19 pandemic has changed almost complete scenario.
“During the Covid-19 pandemic, social distancing measures, public concerns that cash may transmit the Covid-19 virus and new government-to-person payment schemes have further speeded up the shift toward digital payments, and may give a further impetus to CBDC.”
Latest, in the Covid-19 pandemic, the references to a “digital dollar” in the early United States fiscal stimulus bill has also accelerated the interest in CBDCs in some jurisdiction.
Though, central bank digital currency is not the new concept. It was first proposed by an American economist James Tobin in 1987 via “The Case for Preserving Regulatory Distinctions” which did not get much attention.
The information notes that “the first publicly announced work on retail CBDCs was conducted by the Swedish Riksbank (Sveriges Riksbank (2017).”
As per the report, since 2016, the concept of retail and wholesale CBDC has proliferated the retails pilots of CBDC projects via Central banks of various countries. And in 2020, the interest in CBDCs has mounted up which has beaten the record of Bitcoin and Facebook’s Libra stablecoin.
“As of mid-July 2020, at least 36 central banks have published retail or wholesale CBDC work (Graph 3). At least three countries (Ecuador, Ukraine, and Uruguay) have completed a retail CBDC pilot. Six retail CBDC pilots are ongoing: in the Bahamas, Cambodia (Bomakara (2019)), China, the Eastern Caribbean Currency Union, Korea (Bank of Korea (2020)) and Sweden).9 Meanwhile, 18 central banks have published research on retail CBDCs (eg Harahap et al (2017), Burgos and Batavia (2018), Kiselev (2019) and Bank of Japan (2020)), and another 13 have announced research or development work on a wholesale CBDC.”
“The retail CBDCs are more likely where there is a larger informal economy, and wholesale CBDCs are more advanced in economies that have higher financial development.”
Public Interest in CBDCs Reflects Hype
From the past few months, the internet searches for CBDCs and related topics have become more prominent paralleling to Bitcoin and Facebook’s Libra, as per the data by Google and Baidu. The report cited.
The report also mentioned that China has become the impetus towards the launch of the CBDC project. The introduction of the People’s Bank of China (PBOC) CBDC project which is the world’s most populous country and second-largest economy may have far-reaching implications.
By default, all merits to Covid-19 pandemic which has accelerated the whole process and created the need for digital payment systems.
“Events such as the Covid-19 pandemic highlight the value of access to diverse means of payments, and the need for any payment method to be both inclusive and resilient against a broad range of threats, just as cash is.”
BIS report stated, as per the overview, “none of the (CBDC) designs survey is intended to replace cash; all are intended to complement it.”