What exactly is a Central Bank Digital Currency (CBDC)? A CBDC is virtual money backed and issued by a central bank. As cryptocurrencies and stablecoins have become more popular, the world’s central banks have realized that they need to provide an alternative—or let the future of money pass them by.
Key findings
105 countries, representing over 95 percent of global GDP, are exploring a CBDC. In May 2020, only 35 countries were considering a CBDC. A new high of 50 countries are in an advanced phase of exploration (development, pilot, or launch).
10 countries have fully launched a digital currency, with China’s pilot set to expand in 2023. Jamaica is the latest country to launch a CBDC, the JAM-DEX. Nigeria, Africa’s largest economy, launched its CBDC in October 2021.
Many countries are exploring alternative international payment systems. The trend is likely to accelerate following financial sanctions on Russia. There are 9 crossborder wholesale (bank-to-bank) CBDC tests and 3 cross-border retail projects.
Of the G7 economies, the US and UK are the furthest behind on CBDC development. The European Central Bank has signaled it will aim to deliver a digital euro by the middle of the decade.
19 of the G20 countries are exploring a CBDC, with 16 already in development or pilot stage. This includes South Korea, Japan, India, and Russia. Each has made significant progress over past six months.
The financial system may face a significant interoperability problem in the near future. The proliferation of different CBDC models is creating new urgency for international standard setting.