The Bank for International Settlements, often called the central bank to the world’s central banks, set out recommendations on June 23 as to how a CBDC should be. BIS estimated that around 56 central banks and monetary authorities around the world are now looking at digitizing their currencies as commerce shifts online, as reported by Reuters. Central banks of major economies are actively looking into CBDCs.
Physical cash transactions are on the decline.
The usage of physical cash has fallen in the wake of online e-commerce portals and pandemic-induced lockdowns. The big bankers also see decentralized currencies such as Bitcoin and “Big Tech” as a threat, especially the likes of Facebook and its plans for its own cryptocurrency Diem, formerly known as Libra. Head of the Innovation Hub at BIS, Benoît Cœuré, cautioned that without CBDCs, digital money would become increasingly dominated by big tech firms. Many central banks have said that they are developing CBDCs to ward off competition from cryptocurrencies.
China is on its way to become the first major economy to issue its CBDC.
Though the Bahamas became the first country to officially launch a general purpose CBDC, known as the Sand Dollar, China will be the first major economy to issue its national digital currency. As reported earlier, Chinese authorities handed out $6.2 million in digital currency to citizens of Beijing for a trial of its digital currency/electronic payments (DCEP) platform. The Beijing Local Financial Supervision and Administration Bureau allowed citizens to apply for the handout by using two banking applications. The giveaway was part of a lottery system using “red packets” valued at 200 Yuan a piece. Shenzhen also completed a digital currency trial in October 2020. Central banks of major countries, including Japan, Russia, USA, are working on CBDCs.