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Worldwide Adoption of Digital Currencies
A startling 134 nations, accounting for almost 98% of the global economy, are currently investigating the implementation of digital counterparts to their currencies. This movement has more than half of the countries in advanced stages of development, trial, or launch, according to a study released on Thursday.
U.S. Lags Behind in Digital Currency Initiative
The study, conducted by the Atlantic Council, a U.S. think tank, revealed that all G20 nations, except Argentina, are on the path to developing their digital currencies. Notably, however, the United States seems to be losing its pace in this digital race. While the U.S. is progressing steadily towards implementing a banks-only fiscal "wholesale" digital dollar, the plan for the broader U.S. populace appears to have hit a wall, reports highlighted.
Federal Reserve Chairman Jerome Powell echoed these concerns earlier this month, indicating that such a venture is not on the immediate horizon. Despite U.S. President Joe Biden's 2022 mandate to investigate a digital dollar, the subject has sparked political tension. Donald Trump, Biden's Republican opponent in this year's election, promised to block the initiative.
Diverging Central Banks and Potential Risks
"The real takeaway is the growing divide between the world's major central banks concerning CBDCs (Central Bank Digital Currency), with countries like China, Europe, and Japan significantly ahead of the U.S.," said Josh Lipsky from the Atlantic Council. Supporters see digital currencies as offering novel functionalities while presenting an alternative to dwindling physical cash. However, fears about government surveillance have sparked protests in numerous nations.
The report suggests that U.S. tardiness might result in "a more divided international payments system". Lipsky warns that if other countries proceed and establish new standards for CBDCs, Washington could lose some of its global finance sovereignty.
Current Digital Currency Pilots
With 36 active pilot projects worldwide, China's e-CNY leads the pack, with trials involving 260 million people in 25 cities. Meanwhile, Europe's Central Bank (ECB) is already half-way through its digital euro "preparation" phase. Countries like the Bahamas, Jamaica, and Nigeria have fully launched their digital currencies. However, the Eastern Caribbean Currency Union (ECCU) — a collective of 8 countries — recently became the first to deactivate one due to user access problems.
Furthermore, the development of wholesaler CBDCs has doubled post Russia's 2022 Ukraine assault and the consequent G7 sanctions. Thirteen international wholesaler ventures, including the "mBridge" project that connects China, Thailand, UAE, and Hong Kong, are currently in progress.
All BRICS nations -Brazil, Russia, India, China, and South Africa- are in advanced stages of their digital currencies with a major launch expected around 2027. Despite lingering uncertainties around full launch timelines, especially for China's e-CNY, it's clear that the digital yuan's extensive trials make it the most advanced pilot.
