Monetary authorities around the world are rushing to design digital currencies to ward off the growing influence of cryptocurrencies. With the traditional banking system expected to collapse soon, nations are bracing up for the future by stepping ahead of digital merchants.
The Central Bank Digital Currency (CBDC), as they are popularly called, are virtual money issued by a nation’s central bank. As cryptocurrencies and stablecoins have become more popular, the world’s central banks have realised that they need to provide an alternative—or let the future of money pass them by.
An all-digital version of the paper currency can be accessed and accepted by merchants and consumers without an internet connection, credit or even a bank account. Digital currencies are the next wave in the “evolution of the nature of money in the digital economy,” Hyun Song Shin, economic adviser and co-leader of the Monetary and Economic Department at the Bank for International Settlements, said.
Around 87 countries (representing over 90 per cent of global GDP) are now exploring a CBDC. Several major economies are engaging in cross border payment tests. The newest is Project Dunbar – a partnership between South Africa, Singapore, Malaysia, and Australia.
Of the countries with the four largest central banks (the US Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England), the United States is furthest behind. About 17 other countries, including major economies like China and South Korea, are now in the pilot stage with their CBDCs and preparing a possible full launch.
That said, here are seven countries that have fully launched a digital currency.
Sand Dollar (The Bahamas)
Issued by the Central Bank of The Bahamas in October 2020, the Sand Dollar is a digital iteration of the Bahamian Dollar – and one of just two fully operational retail CBDCs worldwide. The Sand Dollar which holds identical legal status as the standard currency is issued by authorised financial institutions and can be used for a variety of transactions.
Dcash (Eastern Caribbean)
The Eastern Caribbean April created its form of digital currency to help speed transactions and serve people without bank accounts. According to its central bank, the “DCash” is the first blockchain-based currency introduced by any of the world’s currency unions, though some individual nations have similar existing systems. It is available in four island nations under a year-long pilot program: St. Lucia, Grenada, Antigua and Barbuda, and St. Kitts and Nevis.
eNaira (Nigeria)
Nigeria is the latest country to launch a CBDC, the first outside the Caribbean. The issuance of the digital currency, called the eNaira, comes after the Central Bank earlier in February outlawed banks and financial institutions from transacting or operating in cryptocurrencies as they posed a threat to the financial system. The eNaira will complement the physical Naira, which has weakened 5.6% this year despite the apex bank’s efforts to stabilise the currency.
