The Advance of CBDCs Seems Unstoppable

Since Russia’s invasion of Ukraine and the resulting G7 sanctions, developments around central bank money for financial institutions (wholesale CBDC) have doubled. 68 countries are currently at an advanced stage of research – development, pilot, or introduction – including 19 of the G20 countries. Of these, 11 countries are currently in the pilot phase, including Brazil, Japan, India, Australia, South Korea, South Africa, Russia, and Turkey. The European Central Bank is currently in the preparatory phase and is conducting practical tests in which transactions are carried out in a controlled environment. Three countries have already fully implemented a CBDC – the Bahamas, Jamaica, and Nigeria.

Additionally, there are 13 cross-border CBDC projects, including mBridge, which connects China, Thailand, the United Arab Emirates, and Hong Kong. This project is set to enter a new phase this year and expand to 11 more countries.

As the world’s largest CBDC pilot project, the Chinese digital yuan (e-CNY) has reached 260 million wallets in 25 cities. Since 2022, it has been used in a range of areas, including transit traffic, healthcare, and the purchase of crude oil. This year, the pilot project is focusing on optimizing the use of the e-CNY by tourists abroad and expanding cross-border applications.

Despite the rapid progress, challenges remain. In the USA, development has stalled. There is a growing divide between the US and G7 banks, including the Bank of England and the Bank of Japan. The CBDC has become an issue in the current US presidential election campaign, with several candidates speaking out against its development.

The extent to which government institutions can ensure the security of CBDCs, protect the privacy of private individuals and keep the existing financial system stable remains to be determined. Nevertheless, it seems that CBDCs are here to stay.

Gabriel Juri
SIX