2023 is already shaping up to be a major year in the exploration of central bank digital currency (CBDC). As of March 1, sixty-four countries were at an advanced stage of development and more than twenty central banks had launched their pilot projects, including Brazil, Japan and Russia. To learn more about these countries, follow our CBDC Trackerwhere we track and update developments in 119 countries, representing more than 95 percent of global GDP.
Despite being only three months away from 2023, these 18 countries have made significant progress on central bank digital currencies.
The Commonwealth Bank and the Australia and New Zealand Banking Group have joined the Reserve Bank of Australia’s pilot program to explore use cases for eAUD. They will work alongside twelve other financial institutions and payment companies to test their CBDC.
After conducting a closed pilot program with financial institutions in 2023, the President of the Central Bank of Brazil, Roberto Campos Neto, declared his intention to launch a CBDC in 2024.
In 2023, the Bank of Canada released an analytical note highlighting the importance of offline payment functionality in CBDCs.
In January 2023, China included e-CNY in its monetary circulation calculations. e-CNY represented 0.13% of cash and reserves held by the central bank.
In 2023, India’s largest retail chain, Reliance Retail, will start accepting digital rupee payments in stores during its pilot phase. In March, India began testing offline functionality for its CBDC.
After completing its proof of concept, the Bank of Japan will launch a pilot program in April to test the technical feasibility of the “digital yen.” Japan will also create a CBDC forum, inviting private companies engaged in retail payments or related technologies to participate in the debate. Based on the results, the bank will decide whether it will launch a digital currency by 2026.
In February 2023, the International Monetary Fund released a technical market report on the implementation of a retail central bank digital currency. The report concluded that a cross-border rCBDC would be particularly beneficial for Jordan.
In 2023, the National Bank of Kazakhstan launched a pilot project for its CBDC, which is expected to continue until 2025.
In 2023, the central bank of Laos will begin testing a prototype, called Digital Lao Kip (DLak).
Prime Minister Dritan Abazović announced that Montenegro plans to create a digital currency in partnership with Ripple, an exchange and funds transfer system for settling payments.
In January 2023, the central bank of the Philippines announced that its pilot project, which tests wholesale CBDCs, would continue until 2024 with select financial institutions.
The Bank of Russia is preparing to launch the first mainstream pilot project for the digital ruble on April 1, 2023.
In January 2023, the Saudi Central Bank announced that it was intensifying its research into CBDCs, with a focus on wholesale CBDC use cases domestically with local commercial banks and fintech partners.
In December 2022, the Central Bank of the Republic of Turkey announced that it had successfully executed its “first payment transactions” using the digital lira. It plans to launch a central bank digital currency in 2023.
In 2023, as part of its financial infrastructure transformation agenda, the UAE plans to launch a CBDC in hopes of addressing inefficiencies in cross-border payments and spurring innovation domestically. In March, the UAE will explore a CBDC development and interoperability framework with the Reserve Bank of India.
In January 2023, the Deputy Prime Minister of Ukraine announced that he would receive his salary in e-hryvnia. The Ministry of Digital Transformation’s initial plan was to start the pilot phase in 2024, but the government is now pushing to start the pilot phase in 2023.
In February 2023, the Bank of England and the UK Treasury published a consultation paper setting out the case for a digital pound. The paper concludes that it is too early to decide whether or not to introduce the e-book, but that preparations for this decision are underway.
U.S. Treasury Undersecretary for Domestic Finance Nellie Liang announced the creation of an interagency working group to explore the development of a CBDC during a speech at the Atlantic Council. She noted that this group will include representatives from the Department of the Treasury, the Federal Reserve, the National Security Council and other respective government agencies.
The Nordic Center of the Bank for International Settlements Innovation Center is launching Project Polaris to explore the security and resilience of CBDC systems as well as online and offline payment functionalities. The project will start with an analytical report on offline payment possibilities for CBDC systems. This is followed by an “in-depth” event where invited vendors discuss their solutions to potential risks and scalability options for offline CBDCs.
Wholesale or retail CBDC
A necessary choice that countries must make is whether to choose between wholesale CBDC and retail CBDC.
To summarize, a wholesale CBDC is used by financial institutions for bank-to-bank transactions and settlements. For example, wholesale CBDCs have been used to facilitate efficient cross-border payments between international financial institutions; they reduce costs, improve speed and reliability, and eliminate middlemen.
A retail CBDC is simpler. This type of CBDC is accessible to the general public for all transactions related to the purchase of goods and services. In simpler terms, it can be used in the same way as cash, but in digital form.
Countries have also chosen to implement wholesale and retail CBDCs. By building this hybrid infrastructure, central banks can use CBDC to settle transactions between financial institutions, and consumers also have the option to use CBDC for their retail payments. Australia, China and India are just a few countries testing both use cases for their CBDCs.
The chart below shows how these 18 countries have decided to implement their CBDCs in 2023. Some have tackled wholesale and retail CBDC projects, while others are still making their decision.
The GeoEconomics Center will continue to monitor the exploration of CBDCs around the world, as governments and central banks continue to adopt efficient, resilient and inclusive digital solutions. To stay informed of these developments, follow our CBDC Tracker and our The future of money work. 2023 has just begun, but we can expect a lot more from the digital currency world this year.
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At the intersection of economics, finance and foreign policy, the Center for Geoeconomics is a translation center whose goal is to help shape a better global economic future.