Central bank digital currency (CBDC) is already a reality. The Central Bank of the Bahamas has the distinction of launching the world’s first CBDC, the Sand Dollar, in October 2020. China is perhaps most advanced in the preparation for the retail application of its CBDC, the digital RMB.

In a five-month trial from April to August 2020, the People’s Bank of China deposited $1.6 million (RMB 10 million) into 113,300 consumer digital wallets and 8,859 corporate digital wallets for residents and businesses in Shenzhen, Suzhou, and Xiong’an. These processed a total of $162 million (RMB 1.1 billion) through 3.1 million transactions during the period. In addition, the central bank distributed $6.2 million (RMB 40 million) of digital RMB red packets over the Lunar New Year holiday period in February 2021. It has further plans to trial the digital RMB at the 2022 Beijing WinterOlympic Games where foreign athletes and visitors will have a chance to use it.

In Europe, Sweden’s “e-krona” pilot appears to be most advanced. The country has arguably the lowest cash usage in the world. In 2020, it registered under 10% of cash payments. The central bank, Sveriges Riksbank, conducted a pilot with Accenture in February 2020 on R3’s Corda blockchain platform to develop a technical solution for an e-krona that can work as a complement to cash.

While CBDC trials and implementations so far focused on domestic and mainly retail use, they have the potential to enhance the efficiency of cross-border payments without the need for a global unit of account. The Bank for International Settlements (BIS) believes that there is potential for multi-CBDC (mCBDC) arrangements to improve the interaction of CBDCs across borders. These will facilitate the interoperability among national CBDCs by improving compatibility, inter-linking or integrating national pa...

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Keywords:CBDC, Fiat Digital Currency, Digital Assets, Retail Payments, Cross-Border Payments, Online Banking, Cashless