Digital Coins By States: Country’s Accepted, Rejected and Researched Statuses
The concept of CBDCs, or Central Bank Digital Currencies, is used when digital currencies are adopted by a federal regulator, essentially under its rules, with the central bank issuing this digital trust money. Of course, they differ from cryptocurrencies in its most popular and decentralized form. The regulator also becomes a holder of this currency as well.
This idea is to attract as many governments around the world as possible. Some of them have already launched similar projects related to it, others are still investigating, while others have rejected the idea for the time being.
Here is a list of the countries that are adopting, rejecting, experimenting and researching Central Bank Digital Currencies.
Senegal is one of the first countries to adopt a national digital currency, having issued its blockchain-based eCFA in December 2016.
Under the CBDC concept, the eCFA is entirely dependent on the central banking system and can only be issued by a licensed financial institution, although it has been developed separately. Therefore, the eCFA was designed to be distributed together with paper money as legal tender.
In 2015, Tunisia became the first country in the world to issue a national currency based on a blockchain called eDinar, also known as eDigicash and BitDinar. Like cash, the distribution and issuance of the eDinar is overseen by a government agency.
As in the case of cryptocurrency, there are transaction fees integrated into the eDinar system, although they are insignificant, as the maximum amount is limited to one dinar.
The Marshall Islands
Since March 2018, the Marshall Islands implemented a legal tender currency: it is known as sovereign cryptocurrency (SOV). The currency was first introduced in late February, when the government – the island has no central bank – approved the Declaration and Issuance of the Sovereign Currency Act.
In February 2018, the Venezuelan government launched a national cryptocurrency called Petro. It is backed by the country's oil, gold and mineral reserves, according to President Nicolás Maduro. The currency was designed to prevent US. sanctions from negatively impacting the Venezuelan economy.
The official statement and document published by the government reads as follows:
“The owner of the Petro would be able to change the market value of the crypto-asset for the equivalent in another cryptocurrency or in Bolívares at the official exchange rate published by the national crypto-asset exchange house. The holder of the Petro will have a virtual wallet, which will be of his own responsibility, as well as all the associated risks related to its use.”
Ecuador is one of the pioneer countries in terms of adoption of the CBDC. The country announced its own electronic currency (e-money, or ED) in 2014. In February 2015, it was acting as a functional means of payment, allowing qualified users to transfer money through a mobile application.
However, the currency finally failed. In December 2017, the National Assembly of Ecuador passed legislation to abolish the central bank's electronic money system and outsource electronic payment systems to private banks.
Estonia has been considering launching its CBDC called the Estcoin. However, he abandoned the idea after facing criticism from EU regulators. The President of the European Central Bank, Mario Draghi, pointed out that such currencies are not allowed under Eurozone legislation.
On 30 May, the Hong Kong government issued a press release stating that it would not issue a CBDC in the near future, citing the existence of an already efficient payment infrastructure.
A government report argued that any benefit of the CBDC may be limited due to the existence of efficient private retail payment products, essentially making the CBDC an issue that requires further study and proof of concept work to determine its feasibility for payment applications.
In April, the central bank of Japan, ruled out the idea of the CBDC, as Deputy Governor Masayoshi Amamiya stated that these currencies could have a negative impact on the existing financial system. It is important to mention that Japan has recognized Bitcoin as legal tender.
The country that has most recently rejected the idea of the CBDC is Germany. On July the 5th, the German Federal Ministry of Finance declared that issuing a CBDC would be too risky to implement in response to Green Party MP Gerhard Schick.
Uruguay has made the greatest effort in terms of testing the concept of CBDC. In November 2017, the Central Bank of Uruguay presented a six-month pilot plan for the issuance and use of the digital version of the Uruguayan peso. The agency emphasized that it is not a new currency, it is the same Uruguayan peso that, instead of having a physical support, works in a technological and innovative way.
In September 2017, the government of Dubai announced that Emcredit, a subsidiary of Dubai Economy, will work with the British startup Object Tech Grp Ltd to create an encrypted digital currency called emCash. However, no specific date was announced, indicating that the project is in its draft stage.
In April 2018, days after banning local banks from all cryptocurrency transactions, an Iranian government minister confirmed that an experimental model of national digital currency had been developed.
Singapore has made progress in experimenting with CBDC, although it is questionable whether the information will be made public. In June 2017, the Monetary Authority of Singapore (MAS) published a report on the so-called “Ubin Project”, a blockchain-driven plan to put the “Tokenized form of the Singapore Dollar” (SGD) into a single currency.
Back in November 2017, the Bank of Canada published a report entitled “Central Bank Digital Currency: Motivations and Implications”, which was written by the Currency Department. While this document does not necessarily represent the Bank of Canada's official position on the CBDC, it clearly demonstrates the agency's interest.
The People's Bank of China has been researching the concept of CBDC for quite some time. A research institute called Digital Currency Research Lab was established for this purpose. However, it seems that the country is in no hurry to issue a national digital currency. In March, PBoC Governor Zhou Xiaochuan expressed the agency's cautious stance on the issue.
Israel has been considering issuing a national cryptocurrency. It would be a digital shekel that corresponds in value to the physical shekel. This is planned to be tested over a considerable period of time, and the first reports on the issue began to emerge in December 2017, when the price of Bitcoin was reaching all time highs.
In December 2017, the Swedish Central Bank (Riksbank) published an action plan for the second phase of the “e-Krona project“. An “electronic crown” is defined as a general electronic means of payment and as a complement to cash. The document also states that the Riksbank has not yet taken a decision on whether or not to issue an electronic krona and the aim is not for an electronic krona to replace cash.
In fact, the main reason why the Riksbank has launched e-Krona is the sharp fall in cash popularity in the country.
According to reports from May, the Norwegian central bank is considering developing its own digital currency as a cash supplement to ensure confidence in money and the monetary system.
Norway’s biggest bank, Den Norse Bank, is working side by side with IOTA in order to test different financial products and solutions.
On June the 5th, the Bank of Thailand joined the rank of countries considering issuing their own cryptocurrencies. BoT Governor Veerathai Santiprabhob revealed details of a new project in which the central bank partnered with other Thai banks to develop a new way of carrying out interbank settlement using a CBDC.
According to the BoT, the release of its own cryptocurrency would reduce transaction costs and validation times due to the lower intermediation process required compared to current systems provided by traditional financial institutions.
In May, the Bank of England indicated its position on the CBDC in two working papers. First, the central bank published an investigation analyzing various risks related to CDBCs. In particular, the paper concluded that, after the initial approach, there was no reason to believe that the introduction of a CBDC would have a negative effect on private credit or the overall provision of liquidity to the economy.
There are different countries that are trying to invest in CBDC. There are some studies already published about possible effects and benefits, but no country was able to really implement the proposed solution.
It will be important to follow very closely who will be the first country to implement a CBDC because it will be studied and analyzed by other possible interested states around the world.