60% of Central Banks are Exploring CBDCs: The European Central Bank has Reached the 'Investigation' Stage

Jul 16, 2021 at 09:02 // News
Coin Idol
Are we entering the CBDC era?

The European Central Bank has just announced that it has reached the investigative stage of its digital euro project. If successful, the European Union would be the largest economic bloc to implement a Central Bank Digital Currency (CBDC) project. The progress made by the European Central Bank is a step towards a "CBDC era".

The CBDC age

The CBDC wave is sweeping north and south, east and west. Nearly every country is considering the possibility of launching its own digital central bank digital currency. In Africa, Nigeria is leading the race after the Central Bank of Nigeria recently announced that it could launch its digital Naira by the end of this year. Globally, China is at the forefront of the competition and has already completed pilot tests for its digital yuan, while South Korea is also catching up with the other countries, according to CoinIdol, a world blockchain news outlet.

Most Caribbean islands that have a common central bank have already rolled out their own versions of CBDC, and the U.S. federal government and the Bank of England are on track to develop their CBDCs. In 2020, 60% of the world's central banks had begun exploring the possibility of developing and rolling out CBDCs.

The euro area joins the CBDC league

The European Central Bank, which has been somewhat slow and cautious on CBDC, has finally woken up and started actual development work on its digital euro, which could lead to nearly 30 countries using a single digital currency provided and controlled solely by the European Central Bank. The bank is now in the exploratory phase of the project, which is expected to last 24 months, after which further developments would be announced.


So far, the European Union (EU) is the largest business organization participating in the CBDC project. If the bank eventually adopts the digital euro, it would have a significant impact on the European and global financial sector. 27 countries with a combined population of nearly half a million people and a total GDP of more than $15 trillion would be able to access and use the digital euro for both local and cross-border payments.

What is driving central banks to issue CBDCs?

It is incredible how the CBDC issue dominates conversations in the world's economic space today. The recent surge in growth and development of CBDCs has led to competition between and among nations, with most countries yearning to release their versions earlier than everyone else.

Emerging economies such as China (Southeast Asia) and Nigeria (Africa) are excited to take their national currencies global and challenge the autonomy of the US dollar, which is now undoubtedly the king of currencies. China would like to use its digital yuan for cross-border transactions.

Although CBDCs are not a complete replacement for fiat currencies, central banks will turn off their money printing machines and reduce high money printing fees. In 2020, the U.S. Fed projected $824,000,000 in printing fees for printing more money as the mega COVID -19 Relief Bill took effect. At the U.S. Fed's latest rate, it costs 6.2 cents to print a $1 banknote. Literally, the cost of printing a dollar is more than half the actual value of the note itself.

Proponents of CBDs also believe it would lead to financial inclusion, just as Kenya's MPESA project has achieved access to financial services for all. CBDCs could be ideal for developing countries where the unbanked population is still huge.

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The cryptocurrency ecosystem treats CBDCs with caution

Despite the renewed interest in CBDCs, the crypto community is not really enthusiastic about the development. One issue in particular: privacy remains a deal-breaker. With the current cash mode of payments, there is no proof of identity or address required for one to do business, which might not be the case with the CBDCs. The crypto community is known for being anonymous and decentralized - the exact opposite of central bank-issued digital currencies. In fact, authoritarian regimes could use central bank-issued digital currency to lay their hands on valuable user data and strengthen surveillance over citizens.

CBDCs could revolutionize the financial sector, but the question of privacy remains unanswered. It is highly likely that governments will use their CBDCs to gain access to their users' personal data. Many countries are now actively exploring the CBDC concept and the next decade could usher in an era of CBDCs. EU accession will grease the wheels of CBDC growth and development.

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