These 9 countries are trying to create their own digital currencies to beat crypto
If you can’t beat them, copy them. At least, that partly explains why central banks in nine countries have introduced their own digital currencies.
Typically, cryptocurrencies are pitched as decentralized alternatives to paper money. This is increasingly a problem for central banks, which could lose control over monetary supply if cryptocurrencies like Bitcoin and stablecoins—a type of token that maintain a steadier value—become the norm.
So some central banks have decided to create crypto competitors that they control. The value of this central bank-controlled digital currency, or CBDC, mirrors the price of its physical equivalent. For example, Nigeria’s e-Naira is worth the same as the physical Naira.
This is in sharp contrast to cryptocurrencies like Bitcoin and Ethereum, whose values aren’t pegged to any fiat currency. Their values can therefore swing wildly, as they have done over the past year.
Benefits of CBDCs could include letting people without bank accounts use digital payments, and giving central banks a lower-cost alternative to cash for providing a national payment method, according to the International Monetary Fund. Yet, critics are concerned about potential cybersecurity threats to these currencies and the lack of anonymity in using them.
On Thursday, the Swiss National Bank and its partners said they had finished the second phase of an experiment known as “Project Halvetica” in which five commercial banks over a three-day period used a prototype digital currency issued by the SNB for inter-bank and cross-border transactions.
In contrast, the E.U. and the U.S. have yet to get very far with developing central bank digital currencies. In July 2021, the European Central Bank launched a digital euro project and is evaluating the possibility of introducing a digital Euro over the next two years. The U.S. has not begun testing a digital currency, but Federal Reserve Chairman Jerome Powell told the Senate Banking Committee on Tuesday the bank would release a report on a central bank digital dollar in the “coming weeks.”
Here are the nine countries that have created their own central bank digital currency, according to the Atlantic Council, a think tank that is focused on international security and global economic issues.
The Bahamas’ digital currency, the Sand Dollar, was the first of any country to go beyond trials when it launched in October 2020. Relatedly, the Bahamas’s central bank said it wants to eliminate the use of checks in the country by 2024 because, in its view, mobile wallet payments and the Sand Dollar are better alternatives for consumers.
After three years of development, Nigeria in October became the latest country to debut a digital currency, the e-Naira. At the time of that announcement, the Central Bank of Nigeria Governor Godwin Emefiele said that 500 million of the tokens had already been minted. Currently, only bank account holders can use e-Naira, but international fintech company Bitt, which helped Nigeria with its digital currency launch, is working to allow Nigerians who don’t have bank accounts use the e-currency.
Antigua and Barbuda, Grenada, Saint Kitts and Nevis, Saint Lucia, Dominica, and Montserrat
The island nations, which jointly operate the Eastern Caribbean Central Bank, have all adopted the bank’s DCash digital currency. The electronic version of the Eastern Caribbean dollar was developed in partnership with Bitt and premiered in March. The currency, which can be used with or without a bank account, lets citizens of these nations make mobile, real-time payments without fees.
The highest-profile CBDC is being developed by China’s central bank, the People’s Bank of China. Although the country has been developing its digital currency since 2014, it has not been fully released yet.
China’s central bank has been trying to increase adoption by giving away tens of millions of the tokens. Last week, the PBOC also released a pilot version of its digital yuan wallet application for people in 10 areas of China including Shanghai and Beijing. The digital yuan is also now compatible with the most popular messaging app in China, WeChat.
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