Updated on January 9, 2023 12:50 PM
According to information gathered from a variety of sources, 105 countries representing more than 95% of the global GDP are exploring a CBDC, as TMC previously reported.
A fresh update on the same topic shows that four nations have either suspended or postponed their CBDC. These four nations are Finland, Japan, Ecuador, and Denmark. Let's first talk about what went wrong with these four countries that caused them to abandon the CBDC quest. It remains to be seen how various CBDCs will actually play out in the countries that are still working on them.
The Bank of Finland began its Avant initiative in 1993, as you may remember. The concept involves using smart cards, which are the same as those seen in modern debit and credit cards. Avant cards, according to a number of sources, existed before attempts to develop the current CBDCs.
The World Happiness Report from 2022 indicated that Finland was the happiest nation on earth. The Finnish central bank described its Avant smart card technology, developed in the 1990s, in a study titled "Lessons learned from the world's first CBDC" published in 2020. The Bank of Finland said that Avant was not just the only project that was put into production at the time, but also the one that "can be considered the world's first CBDC."
According to the Bank of Finland, Avant turned outdated and was finally terminated in 2006 since it cost more than standard debit cards. Consumers were first given the Avant card free of charge, but subsequently, fees were introduced, which obviously reduced customer demand for the card. Another significant distinction between Avant and the CBDC systems currently under development is that cards are likely to be an added element of contemporary CBDC systems. Cards were the primary element in Avant.
Finland appears to embrace a pan-European digital currency, despite abandoning its own CBDC-related initiative, Avant, years ago. Olli Rehn, governor of the Bank of Finland, advocated for the implementation of a digital euro in August 2022 that would work with commercial fintech products to facilitate cross-border payments in Europe.
The Bank of Japan (BOJ) published its inaugural report on CBDC development in October 2020, and in early 2021 it began testing its proof-of-concept for a digital currency. It intended to complete the pilot phase by March 2022. Hiromi Yamaoka, a former BOJ official, cautioned against deploying digital yen as part of the nation's monetary policy in January, this year, citing concerns about the stability of the economy. After the US and China, Japan has the third-richest economy in the world. It also has the third-largest global pension market.
Yamaoka also stressed that a CBDC, as a public good, "must complement and coexist" with commercial payment services in order for Japan to establish the safe and effective payment and settlement systems in its July 2022 report in which the bank said it had no plans to issue CBDC.
Therefore, this nation of Mount Fuji and cherry blossoms intends to delay focusing on CBDC for the time being.
In 2014, Ecuador's central bank, Banco Central del Ecuador (BCE), formally debuted its own digital currency, known as dinero electrónico (DE). Increasing financial inclusion and decreasing the need for the central bank to keep and distribute vast quantities of fiat currency were two significant drivers of the DE programme.
Despite the fact that Ecuador's DE was based on the US dollar rather than a sovereign national fiat currency, several industry watchers questioned if Ecuador's DE was indeed a CBDC. Online reports claim that Ecuador's DE ran from 2014 to 2018, gathering 500,000 members at its height out of a population of about 17 million.
The experiment was ultimately discontinued in March 2018, according to the BCE, who cited legislation that had been passed that had abolished the central bank's electronic money system. The law, which was passed in December 2021, mandated that private banks should handle the outsourcing of e-payment systems.
Ecuador seems to have maintained pessimism against the entire CBDC issue years after abandoning its central bank's digital money experiment. Therefore, the nation is not as such anticipating the launch of a CBDC any time soon.
Denmark was one of the first nations to look at the prospect of releasing a CBDC; the Danish central bank indicated an interest in doing so in 2016. The nation's officials subsequently got to work digitising the local fiat money and exploring the possibility of introducing a digital Danish krone.
The authorities believe that it is unclear how retail CBDCs can significantly add value compared to the current financial solutions in Denmark, thus the bank currently monitors the development of CBDCs globally and has not entirely ruled out the possibility of a CBDC in the future.
On a lighter side, it has been reported that other nations, including Canada, Australia, Brazil, and India, have solid intentions to establish a CBDC. Nigeria is home to more than 218 million people, making the eNaira the largest CBDC project now under development in the whole globe. Pilot CBDCs that have previously been launched in Russia and India are being tested.
Moreover, CBDC may be able to provide greater scalability and liquidity. This is because it will have more acceptability and transaction convenience compared to private digital currencies.