Active central bank digital currencies may not be as close as many believe, as various factors, including concerns about privacy, are impeding their development.
With the rise in popularity of cryptocurrencies, governments around the world have introduced their own versions of digital currency in the form of central bank digital currencies (CBDCs).
China was one of the pioneering countries to initiate research on CBDCs as early as 2014. By May 2020, 42 countries had commenced CBDC projects, with numerous others engaging in some form of research and development on CBDCs. According to the Atlantic Council, 19 of the Group of 20 (G20) countries are in the advanced stages of developing CBDCs.
Currently, there are 167 countries conducting research and development on a national digital currency, as reported by CBDCTracker. Out of these nations, only four have successfully launched a final product: Jamaica, Zimbabwe, Nigeria, and the Bahamas. On the other hand, seven countries, including the Philippines, Kenya, Denmark, Singapore, Ecuador, Curacao, and Finland, have terminated their CBDC projects.
Privacy concerns are a significant obstacle for CBDCs, as some fear that central banks could monitor consumer spending habits and impose restrictions on spending for political or ideological reasons. Harry Halpin, CEO of Nym, highlighted the valid privacy concerns associated with CBDCs, citing a research report in the United Kingdom that revealed public apprehension about potential government abuse of CBDCs.
The introduction of tech giants into the cryptocurrency market, such as Facebook’s Libra stablecoin project in 2019, prompted governments to regulate cryptocurrency projects and explore digital currency through CBDCs. Julian Grigo, head of institutions at digital wallet provider Privacy Wallet Safe, pointed out that the lack of a clear purpose is a major reason for dwindling interest in CBDCs.
Grigo emphasized that while stablecoin adoption is increasing, launching a CBDC would require approval from various parties within a European context, making it a challenging endeavor. He suggested that governments should focus on regulating the stablecoin market rather than launching their own digital currency.
In conclusion, despite the push for CBDCs, concerns about privacy and the lack of a defined purpose may delay their implementation. It is evident that stablecoin regulations and industry partnerships are crucial factors that governments should consider in the evolving landscape of digital currencies.