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Japan intends to uphold simplicity in CBDC design

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While governments across the entire globe have been prepping to roll out CBDCs that entail multiple features, Japan intends to keep it simple with the digital yen. An executive from the Bank of Japan noted that simplicity would be a primary feature of the Japanese central bank-issued digital currency.

The fervor around central bank digital currencies [CBDC] hit the roof after China made fast-paced development in the same. While the Asian country was testing out the digital yuan, an array of countries had just started to discuss the prospects of including CBDCs into their system. Nevertheless, numerous countries took charge and have started developing their native CBDC.

Japan is still researching the prospects of the digital yen. However, the central bank of the country seemed to be well aware of what people need. During a recent speech, an executive of the Japanese central bank, Shinichi Uchida revealed the whereabouts of the digital yen.

Japan to keep it “simple” with the digital yen

Since certain payment channels have existed for a long time now, introducing a new one could most likely disrupt the extant situation. Therefore, before rolling out a CBDC, governments have been profoundly working on co-existence. Keeping the same in mind, Uchida suggested that the Japanese CBDC would have a simple design as it requires to be integrated into the private sector payment models.

The executive further added,

“To achieve vertical coexistence, a relatively simple central bank digital currency (CBDC) design is desirable for the private sector to use it as an ingredient.”

The bank intends to move over to the second phase of experiments of the CBDC only in April 2022. During this phase, the bank would be testing out the major features of the coin.

While the central bank of the country still has no plans of rolling out a CBDC anytime soon, Uchida revealed that the bank was in discussions with the private sector. The bank intends to hear out an array of people and their views about introducing the digital yuan. Hence, the bank engaged with the private sector and exchanged views about the imminent Japanese CBDC.

CBDCs are savings annihilator in disguise alleges Edward Snowden

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Former intelligence expert Edward Snowden recently launched a scathing attack on CBDC and expressed apprehension about its proposed use cases in a blog post titled, ‘Your Money AND Your Life- Central Banks Digital Currencies Will Ransom Our Future,’. According to him, Central Bank Digital Currency, or CBDC as it is more commonly known, is a policy instrument designed to systematically eliminate every wage earner’s savings resources and induce deliberate spending in the economy. He stated,

What is a Central Bank Digital Currency, you ask? Oh, you know: just a “useful policy tool” for casually annihilating the savings of every wage-worker in the country if they don’t spend them fast enough.

Is CBDC a cryptofascist currency?

CBDCs are in general, digital replicas of fiat currencies backed by region-specific governments and modern banking systems. It is noteworthy to mention that the introduction of Facebook-owned stablecoin Diem [previously Libra] back in 2019 acted as a catalyst that triggered a global race to build a virtual currency pegged to their respective fiat currencies. That suddenly changed when the COVID pandemic paralyzed major economies around the world and brought a disruption to the traditional economy and that is how it propel the renewed interest in CBDC.

Even though governments and central banks around the world are banking on CBDCs and touting them as a contender to cryptocurrencies, privacy advocates like Edward Snowden expressed fear that these digital currencies might act as exploiting tools. He went on to further deem CBDC to be a ‘perversion of cryptocurrency,’ terming its core principles and protocols as a cryptofascist currency, meticulously designed to deny the basic ownership rights of an individual’s assets by positioning the state as the caretaker for every transaction.

CBDC developments in recent times

Many countries have started working on their respective central bank digital currencies. However, China is leading much ahead among major economies and has launched its first whitepaper on the digital Yuan this year, and is currently exploring the possibility of integrating into a blockchain as its core CBDC is centralized.

Countries such as Nigeria have already rolled out their own CBDC called e-Naira on a pilot basis this month. The project is significant amid negative crypto sentiments among state officials. Surprisingly Nigeria is among the top tech enthusiasts African country with more than 30% of its citizens owning cryptocurrencies.

While the United States is still lagging in this global race, countries such as Bahamas and Sweden with their very own ‘Sand Dollar’, and ‘e-krona’ respectively pioneering the frontier.

BIS Report outlines CBDC benefits as joint initiative evolves to Phase 3

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Central Bank Digital Currencies or CBDCs have been gradually gaining traction. While some countries are at a later stage in terms of piloting, others seem to have lagged in the global race.

The US, for one, has been struggling with its e-dollar exploration. Nevertheless, entities such as BIS and IMF have continued to advocate for the CBDC rollout in response to the growing popularity of stablecoins and have also backed several collaborative initiatives of the same.

In the latest development, the Bank for International Settlements [BIS] outlined a prominent use case after reviewing a prototype being jointly developed by the central banks of China, the United Arab Emirates, Thailand, and the Hong Kong Monetary Authority.

CBDC Speed and Cost benefits

Titled ‘Inthanon-LionRock to mBridge,’ the report by the Switzerland-based financial institution stated that blockchain-powered CBDCs can potentially minimize cross-border payments’ transaction throughput from multiple days to just a few seconds. According to BIS, the aforementioned prototype shows a tangible improvement not just in terms of cross-border transfer speed but also substantially reduces numerous of the core cost components of correspondent banking. It further stated,

BIS stated that the prototype essentially displayed the potential of faster and lower-cost cross-border transfers for participating jurisdictions. It also went on to add that it can be beneficial for jurisdictions that do not necessarily have strong correspondent banking relationships.

BIS revealed the project evolving into Phase 3 which involves additional experimentation with respect to design choices, technology trade-offs, and defining a future direction from prototype to an open-source, production-ready system.

This isn’t the only joint initiative. As a matter of fact, the central banks of Australia, Singapore, Malaysia, and South Africa unveiled a joint initiative to trial international settlements with the help of CBDC earlier this month. Called ‘Project Dunbar,’ the initiative is expected to prototype shared platforms thus facilitating direct transfers between institutions using digital currencies issued by multiple central banks.

Dunbar is slated to be conducted in partnership with the Bank for International Settlements Innovation Hub from its Singapore Center. Similar to mBridge the initiative will also be based on a DLT-enabled infrastructure to “lay the foundation for global payments connectivity.”.

India could kick-start its CBDC pilot by the end of 2021

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As the world has been going digital, India seemed to be jumping on to this train. India’s central bank official revealed that the country was working towards a central bank digital currency [CBDC].

The world has been moving towards digitalization. The need to go digital spruced up following the emergence of the deadly COVID-19 virus that caused immense destruction. Even though the concept of CBDC existed during pre-COVID times, the need for it grew during and after the pandemic. China’s fast-paced development of the digital yuan further pushed governments across the globe to dive into the CBDC game.

Certainly, India did not want to fall back. The country was previously extremely hostile towards crypto, however, with time the government decided to fully learn about the space and then lay out regulations. Moving over to CBDCs, the governor of the Reserve Bank of India, Shaktikanta Das noted that India was making progress with regards to the development of a CBDC.

India’s central bank governor reveals CBDC trial phase date

In an interview with CNBC, RBI governor Shaktikanta Das suggested that the bank would roll out its first CBDC trial by December of this year. He added,

“We are being extremely careful about it because it’s completely a new product, not just for RBI, but globally. […] I think by the end of the year, we should be able to — we would be in a position, perhaps — to start our first trials.”

Furthermore, speaking about the Indian rupee, the governor noted that the central bank was looking into the impact of the digital asset on the country’s financial sector. In order to do so, the bank is reportedly inspecting an array of aspects of the asset to figure out its influence on the monetary policy and the existing currency.

The country’s recent interest in the development of a CBDC could pose beneficial as it would put itself in the ongoing CBDC race.

Brits still not ready for central bank digital currencies

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While the Bank of England has been working on the development of central bank digital currency [CBDC], the Brits don’t seem to be too excited about it.

Central bank digital currencies have taken the financial world by storm. After digital assets like Bitcoin [BTC] and Ethereum [ETH] flourished, governments across the globe figured that they wanted something similar to these assets, however, less decentralized. While China took a plunge towards CBDCs and already developed the digital yuan, other countries were seen catching up.

The central bank of England seemed to be jumping onto the CBDC bandwagon, however, a recent survey noted that most of the Brits weren’t on board with the plan.

Brits are not so excited about CBDC

As per a survey conducted by Redfield & Wilton Strategies for POLITICO, it was noted that British citizens were rather in suspicion about the launch of a CBDC instead of being excited.

Out of 2,500 participants, only about 24% of Brits believed that a CBDC would do good for society. However, 30% of the participants noted that these central bank assets would do no good to the UK. The fear surrounding cyberattacks was high and most of them [73%] expressed concerns about the same.

Alongside this, the participants suggested that they did not want the loss of payment privacy. Additionally, people were also worried about government authorities seizing their funds.

Furthermore, the Bank of England revealed interest in CBDC recently when the bank’s fintech chief, Tom Mutton said,

“Access to central bank money in the form of CBDC could support wider public policy objectives. These range from the possible benefits for competition and diversity in payments, through to opportunities to promote financial inclusion and safeguard privacy.”

Mutton noted that public trust was a major consideration in the development of a CBDC. However, with the aforementioned results, the central bank would have to try harder to garner “public trust.”

Nigeria to kick start its CBDC pilot in October

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As the world takes on the digitalization wave, Nigeria revealed that it was getting on the journey.

Central bank digital currency [CBDC] rose to fame after China took a plunge into developing a digital version of its fiat currency. While China is way ahead in the game, several other governments have started to catch up. The Chinese government has moved past its research and development phase and has already kick-started its distribution stage. Alerted by this rapid development, other countries have begun developing their own digital assets.

Nigeria hoped on to the bandwagon and even went on to announce the launch of its forthcoming CBDC pilot scheme.

Nigeria takes a leap into digitalization

In a recent webinar, the Central Bank of Nigeria [CBN] pointed out that it would roll out the pilot program for the region’s CBDC project, ‘”GIANT,” on 1 October 2021.

The project was reportedly in the works since 2017 and operated on an open-source blockchain called Hyperledger Fabric. This project has been focusing on the development of blockchain-based solutions, applications as well as products.

Rakiya Mohammed, the information technology director for the Nigerian central bank that Nigeria took this plunge into the CBDC game as 80 percent of central banks across the globe were on the verge of launching or developing a CBDC. Nigeria did not want to lag or be left behind in this move towards digitalization, the bank noted.

In addition to this, the central bank hopes to garner macro-management as well as growth. Easing the process of cross-bored trading is also an added advantage.

While the country continues to embrace the CBDC side, recent comments from the government about cryptocurrencies have led to people thinking that it is anti-crypto. Despite this, crypto is being widely used across several industries in the region. Most recently a school in the country revealed that it would accept crypto for tuition fees.

China takes its CBDC into the insurance industry

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China has been making immense progress in terms of its central bank digital currency [CBDC]. While countries across the globe have just initiated the research phase of their native CBDC, China’s digital yuan is already being used by the public. After being employed across various sectors, the Chinese government has decided to induce the digital yuan into the insurance industry.

China took the lead in the development of CBDC and managed to get on a pedestal with its fast-paced approach. The latest news reveals how much progress the country has been making.

A news portal noted that the digital yuan had ventured into the insurance industry. This program is being carried out by a local branch of the People’s Bank of China [PBoC], and the policies were issued in Shenzhen, South China’s Guangdong Province. Shenzhen subsidiary of Pingan Property Insurance

China continues to stay ahead in the CBDC game

The first batch of the Chinese CBDC insurance policies was issued by the PBoC’s Shenzen branch. With its latest move, the central bank of the region along with the government hopes to expand the use of the digital yuan across several industries. Previously, the use of the CBDC was limited to merely e-commerce platforms and for online payments.

Speaking about the advancement of the digital yuan, Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at the Renmin University of China stated,

“As more users get used to making payments with the digital yuan and the market matures, the application scenarios will be able to expand from the insurance industry to more scenarios such as financial services, life services, and even the purchase of funds and trading in securities.”

While the country has been making headway in this area, certain US senators recently expressed angst against the use of the digital yuan during the 2022 Olympics. The senators suggested that the Asian country would employ the digital yuan to surveil American athletes.

However, the country’s central bank, PBoC, hit back and released a statement that read,

“The US politicians should abide by the spirit stipulated in the Olympic Charter, stop making sports a political matter and stop making troubles out of the digital currency in China.”

USA Senators urge Olympic committee to leave out American athletes from employing digital yuan

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With China hosting the 2022 Olympics, certain officials from the USA seemed concerned about American athletes using the Chinese central bank digital currencies [CBDC], the digital yuan during their time in the Asian country.

China took a massive plunge into the development of a national digital currency. China went on to become one of the first countries to develop and issue its very own CBDC. China’s fast-paced development of the digital yuan certainly caught the eyes of the world. Several countries did not want China to garner an upper hand in the financial sphere, which led them to instigate their very own research and development in the field.

With the digital yuan came an array of rumours surrounding the asset. Numerous officials noted that the Chinese government would be able to track and trace the finances of those using the asset. Keeping this in mind, three senators of the USA went on to write a letter to the Olympic officials urging them to keep the athletes representing the country from using the digital yuan.

USA athletes won’t be using the digital yuan?

The letter signed by Republican senators Marsha Blackburn, Roger Wicker and Cynthia Lummis noted that American athletes should be refrained from accepting or even using the Chinese CBDC.

The senators went on to express fear over how the Chinese Communist Party, along with the country’s central bank, the People’s Bank of China [PBoC], could use the digital yuan to keep an eye on athletes during their stay in the country and even after they revert to the USA.

Elaborating on the same, the senators wrote,

“The integration of China’s digital currency into global commerce has many problematic privacy implications. These concerns are especially pronounced given the Chinese Communist Party’s use of new and emerging technologies to suppress the Uyghur minority, the people of Hong Kong, and those across China who strive for freedom of expression. These concerns are not hypothetical. Rather, digital payment platforms such as WeChat, are already being used to surveil, threaten, and arrest Chinese citizens.”

ECB takes a major plunge towards the Digital Euro

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The European Central Bank aka ECB has been making immense progress with regard to the development of the region’s central bank digital currency [CBDC] the digital euro.

The CBDC race was elevated, thanks to China’s fast-paced development. While China is way ahead in the game, other countries have jumped on the bandwagon. Even while the entire world remains hesitant towards the adoption of crypto, they seem to be going all-in on their CBDC development.

Developing a whole new payment system isn’t an easy task. The research involved in it is an extensive process. ECB seems to have come closer to launching its native CBDC. A recent report revealed that the digital euro was in its “investigation phase.”

ECB’s Digital Euro in the “investigation phase”

As per Bloomberg, Europe’s central bank went on to give a green signal to the investigation phase of the digital euro. While noting that the coming phase would go on for another 24 months. it affirmed that aspects like the design as well as distribution would be given importance.

Furthermore, the statement pointed out that the digital euro would only complement fiat and not replace it. The latest decision would reportedly “not prejudge any future decision on the possible issuance of a digital euro, which will come only later.”

Additionally. the President of the ECB, Christine Lagarde recently stated,

“It has been nine months since we published our report on a digital euro. In that time, we have carried out further analysis, sought input from citizens and professionals, and conducted some experiments, with encouraging results. All of this has led us to decide to move up a gear and start the digital euro project.”

Lagarde has been quite vocal about her interest in developing a CBDC. In addition to the existing advancements the ECB has been making towards the digital euro, it noted that the CBDC would be consuming way less energy as compared to Bitcoin [BTC].

CBDC being explored by New Zealand Reserve Bank

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The Reserve Bank of New Zealand is the latest one to jump the CBDC bandwagon. The country’s central bank announced that it is exploring the potential for a central bank digital currency, CBDC “to work alongside cash as government-backed money,” and is assessing the effects around the emergence of crypto assets such as stablecoins.

According to the Reserve Bank, the main objective is to be responsive to digital innovations in money and payments to make resilient and stable cash and currency systems in the country. With that in mind, New Zealand plans to roll out consultations for CBDC working alongside cash as a form of government-backed money. The official press release also mentioned that the Reserve Bank intends to launch a set of “money and cash issues papers for feedback from August to November,” which build upon the “Future of Cash” consultations from 2019.

Assistant Governor Christian Hawkesby said

“Subsequent papers will look at the potential for a central bank digital currency [CBDC] to work alongside cash as government-backed money, issues arising from new electronic money forms including crypto-assets [such as Bitcoin], and stable coins [such as proposed by a Facebook-led consortium], and how the cash system might need to change to continue to meet the needs of users.”

Hawkesby asserted that the country wants to explore the possibilities for a central bank digital currency to help approach some of the drawbacks of reducing physical cash use and services. He went on add,

“A CBDC, similar to digital cash, might well be part of the solution, but we need to test our assessment of the issues and proposed approach before developing any firm proposals.”

CBDC Developments Worldwide

With the latest development, New Zealand now joins the list of some of the world’s major economies currently examining the potential for a CBDC. While China has paved the way. Several countries such as South Korea and Sweden have moved from exploration to piloting stages. Singapore, Indonesia, Cambodia, and Thailand are all in different stages in the exploration and issuance of the digital version of their respective sovereign currencies.

Additionally, Vietnam’s Prime Minister Phạm Minh Chính has also reportedly asked the country’s central bank to start exploring a central bank digital currency as it gains traction across the world in response to the massive popularity of cryptocurrencies.