The central banks across the world are planning on looking for the possibilities of introducing the digital currencies as the economies move towards the digitization in many sectors. The popularity Bitcoin and other crypto currencies are receiving has created a developed interest in the central banks digital currencies (CBDCs) and it only seems to be growing in 2021. Even the year 2020 saw an upsurge in digital currency activity from the central banks worldwide. In the month of October 2020, the small nation of The Bahamas became the first country to release their first CBDC- the sand dollar. The sand dollar is a digital currency which is designed to bring more “inclusive access to regulated payments and other financial services”, and is in circulation now replicating the country’s existing dollar. Since the release , it has gained interest of MasterCard recently and Is set to collaborate with the Central Banks of the Bahamas to give people the option of instant conversion of the digital currency into the traditional Bahamian dollars which will allow them to pay for goods and services in every place, the master card is accepted on the Islands and even outside in any part of the world. The Sand dollar is surely the pride of the Bahamas, but the progress being made in the bigger economies is the actual topic of discussion. According to a survey of 65 central banks conducted by the Bank for International Settlements (BIS), 86 per cent are fetching some or the other form of work on CBDCs, with nearly 15 per cent stirring towards research for their pilot projects. Without a doubt, central banks are now discovering whether CBDCs could help them to achieve their public-good intentions, the BIS noted, including the protection of public trust in money, upholding price stability and guaranteeing safe and resilient payment systems and infrastructure. The BIS also noted that there might be an issue of the ‘retail CBDC’ or a ‘Wholesale CBDC’ which can be used to pay up for goods and services, businesses and shops or even each other and to be transferred between fin corps to manage trade and businesses in the financial markets, respectively.
China has been working on creating a digital currency since 2014 to replace their paper Yuan which is currently in circulation. Yan Xiao, project lead for digital trade at the World Economic Forum (WEF), recently told CNBC that the use of cash is declining. Eventually, cash will be substituted by something in digital format and that is one of the big drivers behind this. To support with the testing, it has already gave out millions of dollars’ worth of digital Yuan for users to pilot throughout major cities such as Shenzhen, Chengdu and Suzhou. And to observe the use of CBDCs in cross-border payments, the People’s Bank of China (PBoC) has allegedly been involved in exploration in an ongoing Hong Kong-based inventiveness called Project Inthanon-LionRock, which includes the Bank of Thailand (BoT) and Hong Kong Monetary Authority (HKMA). Japan is also changing mechanisms in its mission to roll out its CBDC. Rendering to a March 16 report by Reuters, the governor of Japan’s central bank, Haruhiko Kuroda, has suggested that plans to roll out a CBDC remain on course, and experiments will begin this spring. But while such testing looks likely to go ahead, the final launch of a digital currency is unlikely to happen this year.
CBDC will mostly be available on mobile aps shortly and be accessible, and not having to carry physical currency all the time is such a relief as it eliminates the risk of thefts and helps avoid the multiple visits to banks and ATMs.