The value of Bitcoins and NFTs might be dwindling, but a different approach to cryptocurrency is growing in popularity around the world while showcasing a totally different face of the blockchain. Central bank digital currencies are controlled by governments like traditional currencies are and therefore represent the polar opposite of the idea of decentralized, non-traceable Bitcoins. Several small nations and – as of October 2021, Nigeria – have launched central bank digital currencies, and several more populous countries are getting ready to jump aboard a different crypto hype train.
According to the Central Bank Digital Currency Tracker by Atlantic Council, CBDCs were launched even earlier than in Nigeria in Caribbean countries, for example in the Bahamas, Grenada, Dominica and Saint Lucia. The Sand Dollar of the Bahamas was the first central bank digital currency of the world upon its launch in 2019 and cleared the way for a rapid adoption around the region’s small nations.
The Chinese digital Yuan pilot made headlines in April 2019, but the project has not moved on since. Like Nigeria, China has a solid digital and mobile payment infrastructure. Large parts of the two countries’ populations leapfrogged card payments and went straight from cash to digital payment options, which became hugely popular – may they be app or text-based. In developing countries, central banks also consider the potential of digital currencies reaching the unbanked.
Another reason for some governments to champion official digital currencies is the collection of data. Ubiquitous digital payments and tight government surveillance have led to a plethora of payment data already available to Chinese administrators. This knowledge on how people spend money will only grow with the implementation of the digital Yuan, even though the country’s central bank has said it will limit traceability and create what it calls “controllable anonymity.” With the launch of the digital currency, every Yuan in circulation will either exist as physical or as digital currency. Analysts expect the Chinese government to raise the amount of digital currency in the future, thereby lowering the amount of physical currency available in the market. Some even think China plans to make all Yuan digital at one point.
Other countries which are in a CBDC pilot phase include Russia, Thailand, Malaysia, South Korea, Sweden, the United Arab Emirates and Saudi Arabia. It is unclear, however, which program could see a proper launch next. Concrete plans to launch a CBDC were recorded by the source in Canada, Australia, Brazil and India, among others. The digital Euro is also in its development phase, with a pilot scheduled for 2023 in participating nations (as seen on the chart).
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