Mexico could be the next country to launch its own CBDC (Central Bank Digital Currency). This 2022 could ultimately be the year of consecration of central bank digital currencies in different countries.
CBDCs in the countries, where do we stand?
The Atlantic Council provides a useful guide to see how many countries have launched or are in the process of launching their own state digital currencies.
Well, there are currently 9 countries that have an active CBDC and they are:
- Caribbean (with 7 states);
In contrast, there are 14 countries that are experimenting with pilot projects. Among them are Sweden with its e-Krona, Ukraine which will build its own currency thanks to Stellar, but also the United Arab Emirates, South Korea, and most notably, China, the most significant of all because of its vastness.
Europe, Russia and Canada are included among the countries that have the project under development, along with Australia, Brazil and Venezuela (where we are talking about the Digital Bolivar, not to be confused with the Petro).
Further back is the United States, still in the research phase.
Interestingly, there are also seven countries where CBDC projects are inactive, and two where they have been cancelled. These are Ecuador and Senagal.
A graph shows that as of December 2021, 43% of the countries that have envisaged a digital state currency are in the research phase, while only 10% have already launched a state currency.
China at an advanced stage
Leading the list of countries that are planning a digital state currency and are at an advanced stage is obviously China, if only because it is the largest country in the world with a population of over 1 billion. The design of the digital yuan is now in the home stretch. Just in the last few days, Beijing has also launched the app for the Digital Yuan wallet, which is currently only operational for 11 cities. Connected to 9 banks, it also allows offline transactions.
China’s goal is to have everything ready for the Beijing Olympics, which will start on 4 February. The digital yuan is only a short step away from being seen in all its power, both inside and outside China.
In October 2021, Nigeria launched its eNaira, minting 500 million pieces equivalent to $1.21 million. At the moment only account holders can use this e-money, but soon its use will be extended to an additional 60 million unbanked Nigerians but identifiable through the Nigerian identification system NIN.
Payments can currently be made for $484 a day.
Europe and the US lagging behind
The European Union is developing the digital euro, but the rollout may still take several years. The European Central Bank has carried out several technical experiments, but an official decision has not yet been made.
The United States is still in the study phase. It is a safe bet that they will accelerate their plans on the digital dollar in order not to fall behind China.
The latest arrival: Mexico
The latest to join the list of countries that will launch a digital state currency is Mexico. On Twitter, the official profile of the Mexican government announced that the CBDC will be a reality in 2024:
“The Banxico reports that by 2024 it will have its own digital currency in circulation, as it considers these new technologies and state-of-the-art payment infrastructure to be of the utmost importance as valuable options for advancing financial inclusion in the country”.
These few words indicate that the state digital currency will happen, and in two years’ time it will see the light of day.
Why the CBDC rush
With the spread of cryptocurrencies, the national authorities have taken note that today the world of payments can go faster than banks are used to. And that all it takes is a mobile phone connected to the internet to transfer money.
Each state is probably driven by two needs:
- to enable fast transactions;
- not to leave the field open to cryptocurrencies, be they decentralized, centralized, volatile or stable.
In reality, cryptocurrencies, stablecoins and CBDCs are different instruments, destined to coexist rather than compete. Certainly the launch of CBDCs will benefit everyone, because it does not matter how the money circulates, the important thing is that it circulates, because if money moves, the economy moves.