It seems almost certain that 2020 will be the year dedicated to national digital currencies or the so-called CBDCs – Central Bank Digital Currencies.
In the second half of 2019, in fact, we witnessed a series of statements that seem to depict the current situation as an involvement by states and central banks in the issuance of their own national digital currencies.
In this regard, the President of Billion Team Enterprise, Marinella Andaloro, commented:
“2020 will be the year of national digital currencies. But are we ready for this?
At a global level, for about ten years now, we have been moving towards a cashless society, and several countries are already experimenting, or are about to experiment, with national digital currencies.
Technological progress and the consequent paradigm shift have pushed people towards online or mobile payments, inevitably leading to a decline in the use of cash, and developing countries, in Africa and the Far East, but also in countries with a ban like Iran but also South America (Argentina and Venezuela), have been using cryptocurrencies to carry out monetary transfers and as a store of value instead of the fiat currencies suffering from hyperinflation.
With an evolving payments landscape, central banks have recognised the need to adapt to this transition and incorporate new technologies, not only for the benefits in terms of speed and reduction of transaction costs, but also to avoid losing the ability to implement their monetary policy. In this context, central banks are trying to understand the financial and economic impact of the introduction of digital currencies.
It is clear that CBDCs will have a disruptive impact and this will differ across countries, since what may be appropriate for some developed economies may not be suitable for developing countries, where the risks and benefits are inherently different and blockchain technology may provide support to CBDCs, for example, through digital identity during compliance processes inherent in the AML regulations and financial inclusion in line with the sustainability objectives of the United Nations”.
Green light for CBDCs in China and Europe
China, the most populous country in the world, is certainly in pole position. After having revealed that it has been studying and working on its national digital currency since 2014, it seems that in these last months of the year it wanted to start shaping its idea into a reality.
In fact, this week came the announcement of the pilot project that will test the digital currency and electronic payment all over China in the two cities of Shenzhen and Suzhou.
Not only that, the announcement of the beginning of the week seems to come immediately after the revelation by the ECB – European Central Bank – of wanting to develop its own digital currency to enhance the system of current cross-border euro payments.
In fact, the European case suggests that the possibility of creating a European CBDC will only arise if the private sector fails to develop an innovative and efficient pan-European payment system.
The same day, the governor of the French bank, Francois Villeroy de Galhau, stated that the Bank of France has already started a pilot project for the issuance of a digital currency and that its experimentation will take place in 2020.
Concretely, both China and Europe with France seem to value the Blockchain mission and it could also be the case that the projects being tested are based on the technology that has become famous thanks to its cryptocurrency of disintermediation, bitcoin.
The lack of interest in digital currencies in Japan and the USA
The situation in Japan and in the US is different: the idea of a national currency, which has now become of global attention considering the countries that are looking at it, does not seem to be of great interest at the moment.
In fact, at the beginning of December, the Governor of the Central Bank of Japan (BoJ), Haruhiko Kuroda, said that at the moment there is no reason to issue a CBDC in Japan.
At the same time, however, Japan does not remain static in the face of the current digital payments landscape, but rather incentivises and encourages the use of private digital currencies pegged to the Japanese yen.
Perhaps, even if not made official, the strategy implemented by the BoJ would be to evaluate users’ responses to electronic payments while trying to increase adoption in the country with the aim of becoming a cashless country, and maybe in the future issue its own CBDC.
But let’s talk about the US, which among the four nations seems to be the most reluctant. As a matter of fact, there have been no official declarations of intention or willingness on the part of the country to issue a CBDC. Certainly though, like Japan, the US cannot ignore this matter.
It seems that, at the end of November, the Federal Reserve, through its president Jay Powell, expressed its opinion on the matter.
New: Powell told Congress today that the Federal Reserve is exploring whether it makes sense to issue its own digital currency that could be used by households and businesses pic.twitter.com/lH3pnSLkiV
— Zachary Warmbrodt (@Zachary) November 20, 2019
“New: Powell told Congress today that the Federal Reserve is exploring whether it makes sense to issue its own digital currency that could be used by households and businesses”.
Therefore, it is still an initial assessment by the US with regard to the CBDC, which reflects in a certain sense its approach to the peer-to-peer world, completely different from, for example, China.
Moreover, unlike Japan, the incentive in the US to use or issue private digital currencies or crypto is zero or downright discouraging, according to the bill presented this summer by the democratic majority that leads the House’s Financial Services Committee.
A disincentive that has seen, in fact, the suspension of the Libra project of Facebook on American soil.
The already almost concrete implementation of a CBDC in the Islands
It may be because of the island’s more flexible, faster and therefore innovative mentality, but it seems that the British Virgin Islands are ready to implement their CBDC in 2020.
In early December, the new BVI~Life currency was revealed, a stablecoin pegged 1:1 to the dollar and powered by LIFEToken, referring to the Caribbean-based blockchain company LIFELabs.io that designed the new CBDC together with the government.