They’re Coming: Governments Around The World Roll Up Sleeves On CBDCs - OhNo WTF Crypto

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They’re Coming: Governments Around The World Roll Up Sleeves On CBDCs

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The concept of central bank digital currency (CBDC) has been increasingly engaged in recent discussions as worldwide governments speed up the analysis and development of the novel form of currency. The focus of the week is on India, France, and Luxembourg.

CBDCs Are Here

Following the news of the wholesale CBDC pilot launch earlier this month, the Reserve Bank of India (RBI) announced it will test the retail digital rupee in December. The pilot is set to launch in four cities including Mumbai, New Delhi, Bengaluru, and Bhubaneswar.

Upon the launch, the State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank will be the initial banking participants. According to the RBI’s Tuesday statement, there will be an addition of nine cities and four banks at the next stage of the program.

The experiment will be open to a specific group of users and merchants. The digital rupee will be released, “in the same denominations that paper currency and coins are currently issued,” as noted by the bank. Merchants can make payments by scanning QR codes.

India is Making it Happen

The RBI said in October that it was exploring CBDC options for wholesale and retail use. Called e-rupee, the national digital currency of India comes as an alternative form of payment. Nirmala Sitharaman, Minister of Finance of India, revealed earlier this year that RBI planned to launch CBDC within the year.

The level of India’s openness to cashless payments is quite surprising given the fact that India has relied heavily on fiat currency.

Now India joins forces with other Southern Asian countries such as China, South Korea, and Japan to accelerate the development of its own digital currency to make transactions more efficient and cutting-edge.

Apart from Asia, the EU and the United States have devoted a great deal of effort to the CBDC race. The French central bank, Banc de France, completed the experiments of cross-border payment and transaction processing using central bank digital currency (CBDC) in mid-2021.

According to the bank’s latest update, a trial of CBDC use in settling bonds is in operation. The initiative dubbed Venus is testing the use of CBDC in the issuance of 100 million euros worth of bonds.

Nathalie Aufauvre, the central bank’s Director of General Financials said that the experiment, “shows how digital assets can be issued, distributed, and settled within the eurozone, in a single day,” and, “confirms that a well-designed CBDC can play a critical role in the development of a safe tokenized financial asset space in Europe.”

Other entities participating in Venus Initiative include Goldman Sachs, Santander and Societe Generale, and European Investment Bank.

Tightening Cryptocurrency

Governments are promoting electronic payments while CBDC research and development intensify. As people move away from cash payments, no country wants to be left behind. CBDC calls and proposals grow increasingly active and urgent.

However, with cryptocurrencies, governments are becoming more stringent, and financial institutions are becoming increasingly cautious.

The RBI is skeptical of cryptocurrency. Previously, the bank recommended taxing gains from cryptocurrencies and associated asset classes at 30%. The digital rupee is also a competitor to cryptocurrency.

The United States and the European Union began to strengthen regulations governing the cryptocurrency industry, particularly following a string of scandalous collapses from June to the present.

China has long prohibited cryptocurrencies and comparable decentralized assets, and this prohibition has been strengthened following the crash of the LUNA token. However, the country has begun the large-scale pilot implementation of its digital yuan.

Countries anticipate that the CBDC’s design will allow for the collaboration of several central banks and commercial banks. This has the potential to considerably ease integration and improve the cost-effectiveness of future cross-border payments operations.

Lots of experiments are in the progress but no project has reached completion. Whether CBDC can be realized or not will depend on the legal framework and policies that support the issuance and distribution of cryptocurrencies as well as the method of dealing with security risks and privacy concerns.

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