It seems that the race to launch CBDC (Central Bank Digital Currency) has started as many countries are planning to develop their own digital currencies. A few months after El Salvador made Bitcoin a legal tender, Mexico’s central bank announced on Twitter that Mexico will have a CBDC by 2024.
The tweet, which was written in Spanish, asserts that this is an important move as the new technologies and state-of-the-art payment infrastructure will offer a “great value to advance financial inclusion in the country.”
“We’re going to have the use of paper money as the preponderant payment domestically for a long time, so we don’t want to be absent from these technological advances,” Banxico’s deputy governor, Jonathan Heath, said in a recent video conference, according to a Mexican publication El CEO.
Mexico is not alone and other countries like India also are planning to launch a digital currency at a mass scale. The Reserve Bank of India (RBI) also believes that there are certain benefits if adopting digital currency over the current dependency on cash.
Recently, when the talk around India’s upcoming Bill on cryptocurrency started, there was buzz that one of the provisions of the Bill would facilitate creation of RBI-backed cryptocurrency. The Bill, which was supposed to be tabled in the Winter Session of the Parliament, is now likely to be introduced in the Parliament in the next session. The idea, or so, hints the buzz, is that India will disallow all private crypto-currencies like Bitcoin for transactions but at the same time will create a new government-backed cryptocurrency.
In its recent “Trend and Progress of Banking in India” report, RBI asserts that CDBC will offer benefits to users in terms of liquidity, scalability, acceptance, ease of transactions with anonymity and faster settlement. While there are questions related to logistics and the basic model that will be adopted to lessen its impact on monetary policy and the banking system, RBI believes that India’s progress in payment systems will act as a backbone to make a state-of-the art CBDC available for everyone.
It is believed that the launch of CBDC will not only reduce the dependency on cash, but also help offer higher seigniorage due to lower transaction costs, and reduced settlement risk. The Indian government is also studying the risks that are associated with CBDC as virtual currency also poses a threat in terms of cyber-security.
Other countries like the US have already taken some initiative and confirmed that the country would launch five pilot programs in 2022 to “test the potential uses” of CBDC. While the UK's central bank has started the exploration of central bank digital currencies, the Bank of England has also reportedly said that one won’t likely witness this until 2025.
However, this doesn’t seem to be the case with China, as this country is reportedly ahead in the game of developing digital currencies. A CNBC report asserts that China has started rolling out a digital version of Yuan (Chinese currency) in trials in some provinces.
And of course, of late, El Salvador has made news in the crypto scene. In September, the country became the first state in the world to make Bitcoin a legal tender, largely because its president, Nayib Bukele, is a big believer in cryptocurrencies. Just last week, Bukele also trash-talked Dollar saying that “it is game over for Dollar.” Although experts have watched the crypto developments in El Salvador keenly, so far they have not been entirely convinced by Bitcoin as a legal tender.
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