Editor-DN
Since the launch of Bitcoin in 2009, central banks around the world have been closely monitoring the pace of the digital currency market and its impact on our existing financial systems. As a response, they developed the concept of Central Bank Digital Currencies (CBDCs) to keep pace with innovation. financial ecosystem.
Global Data Global Product Holding Analytics 2024
However, according to Global Data, central banks in several developed countries are now slowing down their retail CBDC (rCBDC) projects, with national average cryptocurrency uptake rates still below 20% of Western countries. Global Product Holding Analytics 2024.
The US state of North Carolina, along with the central banks of Canada and Australia, put their local rCBDC plans on hold in September 2024. They concluded that the costs and risks associated with the rollout would far outweigh any potential benefits. Privacy concerns, along with questions about individual autonomy, led the North Carolina Senate to ban CBDC research and development, making the US the first country to ban CBDC. As a result, the future of the digital dollar remains uncertain. Although the House of Representatives nationally passed a bill banning rCBDCs in May 2024, the Senate has yet to act.
Meanwhile, the central banks of Canada and Australia found little justification for moving forward with rCBDC. They did not identify any significant benefits or solutions to the inefficiencies of the existing financial system that would make the rollout worthwhile. The primary motivations for rCBDCs—improving payment efficiency and increasing financial inclusion—are already widely addressed in developed countries, which perform well on both metrics. Instead, central banks in these countries are more concerned with big tech stablecoin initiatives as well as a sense of competition from central banks in developing countries that are further along in their plans.
RBA to prioritize wholesale CBDC project
The Reserve Bank of Australia will now prioritize its Wholesale CBDC (WCBDC) project, which will focus on cross-border efficiency and inter-bank interoperability through blockchain. Australia’s involvement in initiatives such as Projects Dunbar and Mandala reflects a wider trend. With ongoing challenges surrounding privacy, financial system instability, and rCBDC interoperability, more central banks are expected to turn their attention to wCBDC in the near future.
The Federal Reserve will also need to re-evaluate its defensive stance on CBDCs as global initiatives such as Project M Bridge (involving China, Hong Kong) [China SAR](Thailand, UAE and Saudi Arabia) are pursuing the goal of greater de-dollarization in global trade and finance. Such cooperation among emerging economies could pressure the US to reconsider its stance on the WCBDC as it seeks to maintain its role in the emerging global financial system.
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By Global Data
Blandina Hanna Szalay is an Analyst, Banking and Payments, GlobalData.
