CBDCs: Where are we now?

In the BIS January 2020 survey, some 80% of central banks (up from 70%) said they were engaging in some sort of workaround central bank digital currencies (CBDCs). Roughly 40% of central banks said they had progressed from conceptual research to experiments or proof-of-concepts, while another 10% said that they’d progressed to developing pilot projects.

Jump forward 4 months to April, and events have conspired to greatly increase the importance of CBDCs. In BIS’ April 3 Bulletin: COVID-19, cash and the future of payments, researchers suggested that COVID-19 is having a dramatic impact on the public’s relationship with cash, potentially paving the way for CBDCs – despite the scientific community’s consensus that coronavirus transmission via banknotes is relatively unlikely.

“Irrespective of whether concerns are justified or not, perceptions that cash could spread pathogens may change payment behaviours by users and firms,” the bulletin said. “The pandemic may hence put calls for CBDCs into sharper focus, highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats.”

This isn’t just idle speculation. Countries around the world are already upgrading their efforts. We’ve had a look at what they’ve been getting up to with their CBDC planning.


The People’s Bank of China (PBoC) has reportedly completed development of the basic functions of their official digital currency and is now drafting laws geared towards assisting in its implementation.

The Global Times reported a number of Shenzhen-based private companies including Alibaba, Tencent, Huawei and China Merchants Bank have joined forces in the development of the digital currency. Cao Yan, managing director of Digital Renaissance Foundation, told the news agency that these private companies were selected based on their rich blockchain and third-party payments experiences.

Alibaba’s Alipay and Tencent’s WeChat collectively have more than 1.7 billion active accounts across China – 300 million more than the country’s population. Their combination of social media, e-commerce and payments platforms could be the perfect antidote to create an advanced online commercial infrastructure. Since the start of the year, Alipay has publicised five patents linked to China’s official digital currency. The patents cover several areas of the currency from issuance, transaction recording, digital wallets, and more.

Cao Yan believes the digital yuan is ripe for the picking: “If there is a chance China is considering lowering its interest rate into negative territory as a final option and directing such policy to commercial loans and lending, a circulated digital currency rather than M0 will be able to achieve that.”

Despite the fact testing should remain confidential, a leaked screenshot of a mobile app developed by a large state bank surfaced earlier last week. A local report stated the Agricultural Bank of China has developed a test version of a CBDC-related mobile app, alluding to the fact several state-owned banks have been testing the sovereign digital currency for months.

Although neither the PBoC nor the Agricultural Bank of China have released any information on the app, the report outlined several basic functions of the app noticeable from the screenshot, asserting it appears to be operating similarly to other online payment platforms such as Alibaba’s Alipay and Tencent’s WeChat Pay.

Updated 23 April

Following a report from a local news outlet earlier today, The Reformation and Development Commission of the Xiong’An district in Hebei province convened a meeting on Wednesday regarding the rollout of a pilot for China’s digital yuan initiative.

The news outlet, citing government documents, said the meeting involved representatives from government agencies, China’s four state-owned commercial banks, Ant Financial, Tencent, as well as 19 restaurants, entertainment and retail shops set to participate in the test.

Prominent members include McDonald’s, Starbucks and Subway, among others. It’s unclear when the test will start and how long it’ll be carried out for.


Another country likely to launch a CBDC sooner rather than later is Sweden, with their e-krona project. According to a recent local news report, Sweden’s central bank, Sveriges Riksbank, is ready to launch a group to examine the potential e-krona.

The participants are expected to play out different scenarios to determine if the digital currency’s performance is sufficient and reliable. The bank released a statement outlining various requirements the e-krona needs to address before launching: “The aim of the project is to show how an e-krona could be used by the general public. A digital krona should be simple, user-friendly as well as fulfil critical requirements for security and performance.”

The project will run using blockchain technology in “an isolated test environment”. This includes storing the e-krona in a digital wallet, using a mobile app to make payments, deposits and withdrawals. Additionally, users will also make payments via cards and smartwatches. The bank expects to run the test group for a year until February 2021.

The Swedish central bank plans to collaborate with other countries to discuss potential cases for issuing the digital currency. Despite noting a dramatic drop in the use of cash in the country, Riksbank announced they don’t plan to replace cash entirely, saying the e-krona would be complementary to cash.


The Bank of France published a document at the end of March calling for a central bank digital currency able to ease interbank settlements. The institution has looked toward Europe’s most inviting applicants – institutional or otherwise – to explore the potential advantages a CBDC could offer.

By 10 July, the central bank plans to elect ten CBDC-centric applications, based upon innovative utility. Unlike other CBDC projects, the bank has reported they’re not closing the door for technological solutions other than blockchain to facilitate the currency.

Their experiment hopes to address three main goals. First, to illustrate how a CBDC could effectively complete interbank settlements. Second, to uncover additional advantages of a digital currency. And third, to understand the potential impact a CBDC could have on financial stability.

The bank has gone to great lengths to point out the test if purely experimental and won’t continue in the long run. The project is unlikely to be used commercially – focusing on finding usage within interbank transfers, rather than replacing legacy systems. Effectively, this means will be in the form of a wholesale CBDC. Interestingly, some speculated that a wholesale CBDC will have little to no impact on Bitcoin. Martin Nelson, chief operating officer of M10, a provider of digital money rails for banks said “A general-purpose, or synthetic CBDC could lead to reduced demand for Bitcoin, but even that is questionable. Bitcoin is currently more of an alternative asset class used primarily by speculators. A digital euro will not compete with that.” This means the advantages or disadvantages attached to a CBDC are very much dependent on its type.

Hugo Renaudin, CEO and co-founder of French institutional crypto exchange LGO emphasised, like many others, the importance of creating a utile CBDC that allows a central bank to understand where its currency is and who owns it. He pointed to the influx of US’ stimulus cheques as an example, saying that “the US government is living a logistical nightmare to be able to send checks to millions of Americans as part of their COVID-19 stimulus plan. With programmatic money, such as CBDC, it becomes very straightforward to send money to and collect it from a large amount of people at once.” The upward battle the US has faced in that regard has proven a worthy use case for digital currencies.

What’s next?

The BIS’ bulletin notes that countries with well-functioning payment systems and services should adequately assess whether or not experimenting with CBDCs is prudent. But will they? It seems COVID-19 has elevated the desire for central banks to issue their own CBDCs before anyone else, but is this sensible? But is it all just hype or is it warranted? Let us know what you think on Twitter.

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