105 nations researching and developing CBDCs

Atlantic Council outlines potential challenges posed by central bank digital currencies

The Atlantic Council’s Geoeconomic Centre has updated its central bank digital currency (CBDC) tracker to report that 105 countries are now exploring a digital form of state-issued money. 

According to the Atlantic Council, an influential think tank based in Washington DC, the 105 countries exploring a CBDC account for 95% of global gross domestic product (GDP). 

From the Caribbean to Africa

Although The Bahamas was the first to launch a CBDC, it has since been joined by nine other other nations. These include Africa’s largest economy, Nigeria, and most recently, Jamaica. 

China, which has been at the forefront of CBDC research among developed economies, is set to expand its current pilot in 2023. 

The report found that between the G7 economies, “the US and UK are the furthest behind on CBDC development”, whereas the European Central Bank could implement a digital euro by middle of the decade. 

Sanctions impetus to CBDC research

The Atlantic Council recognised that the sanctions placed by Western nations on Russia following its invasion of Ukraine has likely accelerated global research into alternative international payment systems. 

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Russia was removed from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) shortly after the invasion of Ukraine. In response, it has developed its own financial infrastructure, including the SPFS system for bank transfers.

With 19 of the G20 nations researching and developing CBDCs, the report highlighted the potential threat of “a significant interoperability problem in the near future” and called for international standard setting. 

Potential benefits and challenges

Advocates of CBDCs have for years stressed their ability to make payments cheaper and more efficient and to provide easier and safer financial services to as-yet unbanked populations. 

Among the challenges highlighted by the Atlantic Council, were: the possibility of bank runs should citizens pull too much money out of banks at once, the possibility of cyber attacks and the need for strict privacy, consumer protection and anti-money laundering regulations. 

National security implications

Addressing the national security implications of the ongoing payments revolution, the report observed: “They [CBDCs] can, for example, limit the United States’ ability to track cross-border flows and enforce sanctions. In the long term, the absence of US leadership and standards setting can have geopolitical consequences, especially if China and other countries maintain their first-mover advantage in the development of CBDCs.”

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