Latest update on CBDCs in 2022
The original motivation for many central banks exploring CBDCs was to ensure that their fiat currencies stayed relevant in the digital age. After all, if people are increasingly conducting transactions and storing value digitally, why not have a digital version of the nation’s fiat currency? This would make it easier for people to use the currency for all daily expenditures.
Central bank digital currencies (CBDCs) were a big hit in 2021 as far as blockchain and cryptocurrency spheres.
The rapid growth of the cryptocurrency industry has motivated central banks across the globe to look into launching their own digital currencies. There were not a lot of CBDC launches in 2021. Before that, the only notable CBDC launch was the digital Sand Dollar by the Bahamas in 2020. The obvious expectation was that 2022 will finally deliver fully-fledged digital currency launches from these central banks. It appears we still have to wait another one or two years before witnessing any permanent CBDC deployments.
The European Central Bank is one of the most prominent central banks that have been looking into CBDCs. The bank has been researching the possibility of launching a digital euro since early 2020. A lot of progress has been made on this front, but the bank is not ready to launch anything yet.
Lambis Dionysopoulos, a researcher at the University of Nicosia’s Institute for the Future said that “It is true that CBDCs have gained a lot of traction over the past years. More than 85% of central banks are moving forward with some initiative, usually in the form of relevant research, early-stage pilot, and in some extraordinary cases development of CBDC solutions and even limited deployment,”.
However, he continued, “I would not go as far as to say that a global race to launch CBDCs is underway. The fact of the matter is that very few countries are actually in a position to do so and an even smaller number have made any significant progress on this front.”
So, it seems that while many central banks are researching CBDCs in one way or another, Dionysopoulos assures that whatever developments would take time and proceed cautiously. Mostly due to the scale of such a project.
Because there is such a wide range of variables in the design and development of a CBDC, a lot of dedicated research and experimentation is necessary, which is why Dionysopoulos suspects we won’t see many (if any) full CBDC launches in 2022.
When it comes to specific countries and their progress on CBDCs, China has been leading the pack. The country’s central bank, the People’s Bank of China, first announced its Digital Currency Electronic Payment (DCEP) project in 2014. Since then, the bank has been researching and testing the CBDC internally. In
In October 2020, the PBoC finally announced that it was close to launching the DCEP, with a pilot program set to launch in four cities: Suzhou, Chengdu, Xiongan New Area, and Shenzhen.
Indeed, China has now reportedly tested its digital yuan with around 140m Chinese residents, with its central bank reporting in November that total transactions using the digital currency sum to around CNY 62bn (USD 9.8bn). It’s therefore certainly not out of the realm of possibility that China does move ahead with a full launch in 2022, and some estimate that this might happen during the Winter Olympics in Beijing in February this year.
Regardless, most observers say that, partly because of Chinese efforts, pilots and trials will increase in 2022.
I am a bitcoin and crypto currency writer. I also work as a professional trader, and I have experience with stock trading and bitcoin trading. In my work, I aim to provide clear and concise information that helps people understand these complex topics.
