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Sweden Takes A Plunge Into CBDCs As It Prolongs Its Pilot Till 2022

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Central bank digital currencies aka CBDC have been making the rounds around the globe. Sweden seems to be the latest country to explore the prospects of these currencies.

The value of the cryptocurrencies as well as their functions have time and again proved to be extremely propitious. Therefore, the governments decided to take things up a notch by rolling out their own regulated digital asset. China’s progress in the field agitated several other countries to begin their research on CBDCs.

Sweden’s Steer Towards Digitalization

In a recent announcement, the central bank of Sweden, Riksbank revealed that the country was going to prolong its pilot program until 2022. The bank specified that it had partnered with Accenture to carry out the e-krona pilot program. With this partnership, the bank intends to find ways that the e-krona could be on par with the fiat in Sweden.

The announcement further read,

“The main aim of the pilot is for the Riksbank to increase its knowledge of a central bank-issued digital krona. The project is now being extended to the end of February 2022. The aim for the coming year is to continue developing the technical solution, with the focus on performance, scalability, testing of off-line functions and bringing external participants into the test environment.”

While the central bank suggested that it was veering into the whole CBDC scene, it also revealed that it wasn’t issuing an e-krona any time soon. The bank has still not decided on the design or the technology the digital asset would be using.

In other news, payments giant Mastercard had announced the launch of the Bahamian Sand Dollar CBDC card with Island Pay. This affirms that both China as well as the Bahamas are well ahead in the CBDC game. The Sand Dollar has been functioning since October 2020 the latest move could attract more users.

The co-founder of Island Pay, Richard Douglas said,

“By working closely with the Central Bank of The Bahamas and Mastercard, we are able to issue a prepaid card unlike any other in the world. We are now able to bring immediate, critical benefits to our customers at a time when they are looking to find new, innovative ways to pay.”

CBDCs Entail The Potential Of Becoming A ‘Gigantic Flop’

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Central bank digital currencies aka CBDCs have garnered increased interest from governments across the world. China has been spearheading this evolution in the global financial scene. As the country has already begun distributing the digital yuan among its citizens, other countries have just started their research on these digital assets. Amidst this steer towards digitalization, two economists suggest that CBDCs could fail to meet the expectations it has set.

CBDCs Lack “Obvious Justification” Suggest European Economists

In a recent research paper released by European Economists, Peter Bofinger and Thomas Hass point out a different narrative to the whole CBDC game. While the globe is prepping for an elevated payments method with the launch of CBDCs, the aforementioned economists fail to differentiate the prospects of these national digital currencies from what the private banks are already rendering. Though the European Central Bank [ECB] has been enhancing its effort towards the digital euro, Bofinger and Hass suggest that the ECB should steer in a different direction.

The paper read,

“If CBDCs are designed as new payment objects that are used within existing payment systems, the user perspective implies that CBDCs must compete with existing payment objects (above all cash and traditional bank deposits). If CBDCs constitute new payment systems, their acceptance by private users must be analysed within the context of the existing payments ecosystem. For the reputation and credibility of central banks, it is important that any CBDC solution is attractive enough for potential users to adopt it.”

The economists mostly stressed the objectives that CBDCs pursue. They suggested that these national digital assets would probably succeed if they took a road that private providers do not take. However, they were adamant about central bank currencies being a great store of value as opposed to facilitating payments. Bitcoin, the largest cryptocurrency has been tussling with a similar narrative.

While countries have been putting all their resources to deliver a good central bank currency, the economists pointed out that they should entail multicurrency operability while being open to payment objects that are not specific to a single system. Paypal has time and again rendered unbeatable services to the people, competing with an already established system like that for global payments could be a task. If the central banks fail to address all of this, central bank currencies could be a “gigantic flop” the economists suggested.

Exploring Digital Rupee: RBI to Examine Introduction of CBDC in India

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India has finally started to warm the idea of a digital rupee. Thanks to the digital revolution that has taken the world of payment settlements by storm, the Reserve Bank of India [RBI] said that it is exploring if there is a need to issue a digital version of the rupee in the country.

Enter Digital Rupee

The apex bank of India asserted that it would work on a way to operationalize central bank digital currency [CBDC] if its need arises. The Reserve Bank of India on the 25th of January released a 142-page Booklet on Payment Systems, wherein it mentioned,

“In India, the regulators and governments have been skeptical about these currencies and are apprehensive about the associated risks. Nevertheless, RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalize it.”

Digital Rupee is Not a Cryptocurrency

This was an interesting development considering how India has been rather apprehensive of the entire cryptocurrency industry. A quick primer: Previously in 2018, the RBI had imposed the infamous ban on cryptocurrency transactions that was eventually overturned by the country’s Supreme Court last March.

Even as the lack of clarity surrounding the space has led to chaos in the country, cryptocurrency adoption continues to soar especially after the SC’s decision.

However, CBDCs are traditional money, but in digital form; that is issued and governed by a country’s central bank. Hence, this development, in no way, depicts how friendly the laws will become with respect to cryptocurrencies as Digital Rupee makes an entry.

Over the past several years, there have been rapid innovations across the payments sector. This, in turn, has triggered central banks around the world to examine digital routes.

China, for instance, has been at the forefront of CBDC development. In a bid to encourage the usage of CBDCs several cities in the country are all set to planning to go through pilot testing of the digital yuan this year. Among many, Beijing, Shanghai are the major cities that is planning to join the testing to promote the digital currency before its launch in the near future.

Ecuador’s Presidential Candidate Wants To Issue National Crypto Backed By Gold

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Despite being out and about in the financial world, cryptocurrencies have had a hard time being recognized by government officials. Ecuador, however, seems to be more hostile than in other countries. Over the years. Ecuador has been vocal about its resentment towards crypto. A presidential candidate was seen yearning for a national crypto asset.

Ecuador To Get A National Cryptocurrency?

While the citizens of Ecuador have been prepping for the 2021 general election, presidential candidate, Geovanni Andrade was seen sprucing up the financial scene in the country. The Ecuadorian-Chilean Chamber of Mining who is running to be President of the country appeared in a recent interview pointing out the need for a national virtual currency.

With this, Andrade hopes to carry out transactions within the country in a much easier manner. He hopes to peg Ecuador’s national crypto-asset with gold. He added,

“We are looking at ways to create an Ecuadorian cryptocurrency, this does not mean that we are going to escape from dollarization—we must support dollarization.”

This further affirmed that this potential national currency would be an alternative mode of transaction and would not replace the dollar or the country’s national currency. Andrade revealed that this asset could pose extremely beneficial for the country.

Central bank-issued digital currencies have been making the rounds now. Countries across the globe have been working with their respective central banks to roll out cryptocurrency like assets. While China has been spearheading the whole movement, other countries are jumping onto the bandwagon. These assets have been speculated to cause trouble to the hold that fiat currencies and cryptocurrencies have already established.

Canada’s Former Prime Minister, Stephen Harper, in a recent interview revealed that CBDC’s were inevitable. The ever-growing fast-paced financial world would force CBDCs out of every country. However, dealing with regulatory hurdles would be a given for these assets, he suggested.

Ukraine Eyes Development Of CBDC As It Teams Up With Stellar Foundation

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Central Bank Digital Currencies [CBDC] has become every country’s dive into digitalization. Ukraine seems to be jumping on the bandwagon as several countries have already begun developing their own digital currencies. Governments have taken advice from prominent crypto platforms in the development of these assets. Ukraine’s Ministry of Digital Transformation recently revealed its partnership with a  prominent cryptocurrency network.

Ukraine To Embrace Digitalization

In a recent blog post, the Stellar Development Foundation [SDF] unveiled that it had signed a Memorandum of Understanding and Cooperation with Ukraine’s Ministry of Digital Transformation. This memorandum is said to focus on the development of digital assets in the country. With China being well ahead in the CBDC game, other countries were also seen catching up. Ukraine seems to be complying with the “better late than never” motto and is prepping to embrace digitalization. The post pointed out that the country wanted to elevate its status in Eastern Europe’s digital financial market.

While it remains uncertain if the country will opt for Stellar’s blockchain for its CBDC, the memorandum affirmed that both the parties would focus on several other aspects of rolling out a digital currency. This included the development process of the virtual asset, all the way to the implementation, circulation as well as the regulation procedures of the asset.

The Deputy Minister of Digital Transformation for IT Development, Oleksandr Bornyakov pointed out that the leading countries of the world were on board with the development of digital assets and Ukraine’s National Bank has reportedly been researching the prospects of CBDC since 2017. He added,

“The Ministry of Digital Transformation is working on creating the legal environment for the development of virtual assets in Ukraine. We believe our cooperation with the Stellar Development Foundation will contribute to development of the virtual asset industry and its integration into the global financial ecosystem.”

All the activities related to the development of Ukraine’s CBDC has started this month. Additionally, the CEO and Executive Director, Stellar Development Foundation, Denelle Dixon revealed that the SDF was rather impressed by the commitment that the country had towards the adoption of innovation and digitalization.

Japan geared up to launch native CBDC as it takes cues from steps taken by China

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The concept of cryptocurrencies started as a nascent idea but has now spread into a global phenomenon. It is not just the mainstream cryptocurrencies like Bitcoin and Ethereuym that are doing the rounds but rather centralized cryptocurrencies launched by state governments.

China was the first country to take centrally backed cryptocurrencies seriously, especially with the creation of the digital renminbi. Looking at the steps taken by the red dragon, other countries such as Japan were coming to the forefront to voice their contributions using Central Bank Digital Currencies [CBDCs].  

CDBCs are generally used for cashless payments through a smart device such as a mobile phone or tablet. The main intention of a digital currency is to eliminate the overheads and wastage related to physical fiat currency. Former Bank of Japan officials stated that China’s efforts in the ecosystem inspired other regions to follow suit.

The People’s Bank of China has been the pioneer in terms of building a digital trading ecosystem with officials also responsible for releasing coherent updates. Hiromi Yamaoka, an ex-official at the Bank of Japan commented:

“China has prompted moves toward digital currency (around the world). t (has done so at) surprising speed, as central banks tend to take a cautious stance. The design of a CBDC is very tricky and delicate. In advanced countries, a CBDC could conflict with existing payment and banking systems.”

Banking officials in Japan were confident that introducing native digital currencies in a major way would only uplift the financial situation of the country. The proposed method is to give the Japanese population a trading limit access of 50,000 yen per person. This would result in a total trading volume of 5 trillion yen, a figure that would account for just 5 percent of the total Japanese capital circulation.

Digital Currency Forum, a popular advocate of digital currencies in Japan revealed that there were plans to create “some form” of digital currency by 2023. Banking officials were of the opinion that if Japan does not launch a CBDC soon, it may lag behind other major countries in the race towards a streamlined digital economy.

This E-Commerce Platform Becomes The First To Accept China’s Digital Yuan

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China’s tryst with its own central bank digital currency or the Digital Yuan needs no introduction. In the latest development, the e-commerce company Jingdong, popularly known as JD.com, has become China’s first virtual platform to accept the country’s very own virtual currency called Digital Yuan as a payment mode.

According to the official reports, JD Digits, which happens to be JD.com’s fintech branch, will be accepting digital yuan as payment for some products on its online mall. This will be a part of an experimental giveaway of digital yuan to citizens of Suzhou, a city west of Shanghai.

This news comes as China continues to aggressively gain a greater foothold on consumers spending patterns while simultaneously holding ground of its Yuan as the US dollar experiences weakness. Optimistic sentiment toward the Yuan increased as the Dollar index against a basket of 6 other currencies dropped significantly in the last week of November.

Prior to Suzhou’s move, Shenzhen had launched the country’s first large-scale public trial of the beta version back in October. This experimental giveaway of digital yuan will see 10,000 shops will take part in the trial, including the Chinese e-commerce giant, JD.com.

In addition to that, the city will also be delivering virtual red packets of money to the residents and a total of 100,000 digital red packets, each containing 200 Yuan. These will be distributed to residents by the 11th of December, which will be valid until the 27th of December. As reported by the South China Morning Post, any Chinese citizen living in the eastern city is eligible to register for the lottery through the city’s official public services app, called Suzhoudao.

It all started when China began the launch of its CBDC earlier this year. Following this, several pilot schemes have been taken forward in four Chinese cities. Apart from the big four state-owned banks –namely, the Bank of China, China Construction Bank, Industrial, Commercial Bank of China, and Agricultural Bank of China – that have launched internal testing of the sovereign digital currency, two more state-owned banks, the Bank of Communication and Postal Savings Bank of China, will join the trial in the city soon.

As expected, if the program is scaled up nationwide, China would become the most powerful economy to have a national digital currency.

Canada’s CBDC Preps Going About In Full Swing Reveals Deputy Governor Of Canadian Central Bank

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Central Bank Digital Currencies [CBDC] is currently the topic of interest of several governments across the globe. Canada seems to be alarmed by the swift movement of other nations as the country was seen prepping for the launch of its very own CBDC. The deputy governor of the Canadian central bank, Timothy Lane appeared in an interview giving the world insights about the development of the country’s CBDC.

Canada To Roll Out CBDC Sooner Than Expected

The emergence of COVID-19 limited the use of cash and fueled the need for digital payments. This gave the authorities a reality check and initiated the fast flow in the development of CBDC. While China revealed that it was way ahead in the CBDC race, several countries were seen trying to catch up, whereas a few others continued slacking.

Timothy Lane, the deputy governor of the Bank of Canada who is also the head of research at the central bank’s crypto and fintech department revealed that the bank’s perception towards CBDCs has changed over the course of nine months. While the pandemic was one of the reasons, the other was the emergence of other virtual currencies. The central bank feared that these had the potentials of undermining or disrupting the monetary sovereignty of Canada.

While the country is working without setting a deadline, Lane revealed that the world might see a Canadian CBDC “sooner than expected.” Furthermore, China’s headway towards the development of CBDC has left many alarmed. Addressing the same, Lane said,

“The Chinese economy is big enough that even something that is only usable in China, it’s going to already have a very large market. At the same time, there are countries that China has closer economic ties with where there could be more use of a renminbi-based digital currency. I don’t really know if that’s part of their intent or not, to promote a greater use of the renminbi in electronic payments in other parts of the world.”

Additionally, several in the world believe that CBDCs embodied a solution that was in quest of a problem. Lane, however, believed otherwise. While suggesting that CBDCs would not have seen the light of the day if it did not address a real issue, Lane pointed out that it is a mere response to the change in finance and technology. Modernizing is very important. If people failed to do so and continued to dwell in the existing means, there would be a huge gap in the system, he added.

Saudi Arabia and UAE Join Hands to Conduct CBDC Experiment; Participants Include Six Major Banks

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Cryptocurrency developments across the world have captured the attention of several major institutions, with some governments taking the extra steps to adopt virtual currencies. This rapid growth was personified recently when Saudi Arabia and the United Arab Emirates announced a joint central banked digital currency [CBDC] experiment between the two countries.

On Monday, the two countries revealed details about Project Aber which was kick-started in 2018. During the transfer, both parties used a single CBDC issued by the central banks instead of separate currencies that need to be converted.

One of the major reasons why the single CBDC transfer worked is that both the UAE Dirham and the Saudi Riyal are pegged to the United States dollar, creating a common backing. The main idea behind the experiment was to show the rest of the world that the decentralized economy was fast approaching. The experiment used synthetic transactions instead of real money, a transition that is set to be in the pipeline.

According to reports, the difference in monetary policies also features as part of the discussion between Saudi and the UAE. Sources added that future projects include an instant settlement for capital market transactions, use of multiple currencies as well as delivery versus payment. A major advantage of the currency single CBDC setup was that it removed the need for Nostro accounts to be maintained by a separate commercial bank.

The two central banks were not the only participants of the experiment as they were joined by six other commercial institutions. The banks of Riyad, Al Rajhi, and Al Inma in Saudi and Dubai Islamic, First Abu Dhabi, and ENBD in the UAE were the banks that also tested their virtual assets mettle. The aforementioned banks were also brought in to discuss future plans of issuing a CBDC for a specific transfer and then redeeming it at the end.

Security was also discussed during the experiment as it was one of the most important characteristics to bring customers in. All the participants unanimously agreed that transactions need to be resilient no matter what the situation with the transmitter and receiver. If all goes well and good, experiments in the future would include more participants and a much larger transaction ecosystem.

ECB Most Likely To Take 2-4 Years To Develop Digital Euro

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Central banks have been speeding towards the launch of a digital currency. The ECB has also been steering towards the same. With China and several other countries ahead of the CBDC game, the pressure on certain countries has surged. ECB, however, isn’t trying to get on top of the game.

ECB To Explore Prospects Of Digital Currency

In the recent European Central Bank [ECB] Forum on Central Banking 2020, the President of the ECB, Christine Lagarde addressed the development of central bank digital currencies [CBDC]. While she assured that the platform is keen on developing a digital currency, she pointed out that the bank is not “racing to be first.” Lagarde had a “hunch” that the European digital currency would make its way into the financial market.

While the COVID-19 pandemic put the world in shackles further unveiling the need for digitalization, several countries commenced probing and developing digital currencies post the pandemic. However, the concept of incorporating a digital currency into the existing system came to light following the need for elevated monetary sovereignty. She added,

“It’s not a nicety, it’s not a tantrum, it is something that if it’s cheaper, faster, more secure for the users then we should explore it. If it’s going to contribute to a better monetary sovereignty, a better autonomy for the euro area, I think we should explore it. If it is going to facilitate cross border payments, which are very laborious in quite a few corners of our big world, then we should explore it.”

Just last month, the ECB revealed that it would be “intensifying” its endeavors in the development of the European digital currency. While the EU recently denounced the efforts of other private sectors to launch a stablecoin, it asserted that the issuance of a stablecoin should be limited to the ECB only.

Elaborating on the development and issuance of the digital euro, the President revealed that the currency would not be available right away. She suggested that the CBDC could take about two to four years to enter the global financial scene.