Juliet BCryptocurrencies and blockchain have invaded many sectors of activity. Today, cryptocurrencies are so present in our daily lives that thinking of going back is impossible. In any case, this is what the SEC decreed in September 2022.
More and more countries are legislating on cryptocurrencies and others are making them legal tender in the same way as state currency. This is particularly the case of Salvador. Recently, the Central African Republic went even further by creating the first digital currency: the sango corner.
What is the current situation in countries? Who are those currently working on developing their own MNBCs? Which countries are currently working on it?
This is what we will see in this article.
What are central bank digital currencies (CBDCs)?
Even if the term is less used in French, we can use the acronym MNBC for "Monnaie Digitale de Banque Centrale". Very often, the preferred term is the English equivalent, the acronym CBDC which means "Central Bank Digital Currency". We therefore speak of MNBC to refer to currencies created digitally by the central banks of countries.
Unlike the fiat currencies we know today, MNBCs are entirely digital currencies, created electronically.
Why do countries want to have digital currencies?
The idea of creating MNBCs was imputed by cryptocurrencies like Bitcoin. However, with MNBCs, we will remove two fundamental elements of Bitcoin, namely its non-regulation and its decentralization. Thus, MNBCs are cryptocurrencies in technical terms but remain fundamentally state currencies. They are then "centralized" and controlled by central banks.
Money has always evolved over time. Men in society used shells, salt, stones before using the coins and notes that we use today. However, in recent years, currencies have been made electronic with the use of computers. Our societies are gradually eliminating cash due to an increasingly digital use of money.
For practical reasons, cryptocurrencies have an ideal form for the digitalized society that we know. It is perfectly suited to our uses and it was designed for and by IT. It is therefore entirely logical that our banknotes and coins will become entirely digital in the (near) future.
Countries where CBDCs have been launched:
The Central African Republic: Sango Coin
The Central African Republic has made bitcoin legal tender in the same way as the CFA Franc. However, in April 2022, the country announced the release of its own digital currency: crypto sango. This has caused a lot of ink to be spilled - given the political situation in the country currently - and the project arouses as much enthusiasm as detractors. The Central African Republic aims to digitize the entire infrastructure of the country, whether in the finance, justice or administration departments.
- Read the article to find out how to invest in sango coin.
- View video to understand Sango coin.
The Bahamas
The Central Bank of the Bahamas launched its own currency in October 2020. It was the first country in the world to launch a MNBC in the world. In the Bahamas, approximately 20% of the population does not have access to banking services. This is then an opportunity to improve the country's financial inclusion.
Nigeria: e-Naira
Nigeria is one of the top 3 countries that use cryptocurrencies the most in the world. It is also part of the countries with the largest percentage of population to own cryptocurrencies. Despite a population that is very open and interested in bitcoin and cryptocurrencies, the government does not exactly share the same enthusiasm. The country fears ever-increasing capital flight.
However, Nigeria launched its CBDC in October 2021. It is the e-Naira. Nigerians can then pay in stores and pay for state services with this currency. For 219 million inhabitants, only 1 million downloads of the wallet were made. This remains low but this is also explained by the fact that the project is still very recent (barely a year old). Likewise, not everyone has a smartphone, an essential element for using eNaira.
–> 💡 There is now a service to send and receive bitcoin with a cell phone: Machankura.
Eastern Caribbean Monetary Union
The Eastern Caribbean Union involves seven countries: Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia and Saint Vincent and the Grenadines.
The Union has launched its own MNBC to also accelerate financial inclusion. Note that Antiguilla Island was the only country in the Union to have withdrawn. Thus, within the union, the DCash currency is the official currency.
The interesting point is that users can use it without the need for a bank account. All they need is a smartphone and the linked app.
Which countries are testing MNBCs in pilot projects?
Sweden: e-krona
Sweden was perhaps one of the first countries to declare that it was considering establishing its own MNBC. The country has been working on the e-krona project for several years. However, the country fears that older people will struggle in a cashless society.
China and the e-CNY (Digital Yuan)
China was the first major country to have actively worked on its digital currency, since April 2020. The creation of the digital Yuan is part of a more global strategy by China to reduce the use of other cryptocurrencies.
Jamaica
In 2022, Jamaican Prime Minister Andrew Holness declared that Jamaica would launch its MNBC following a successful pilot test. Here again, MNBC will facilitate transactions within the country. This would reduce the cost of banking which is very high for the Jamaican population.
In which countries are MNBCs being developed?
United States
The United States is clearly the country with the most progress in terms of cryptographic projects. Indeed, it is one of the largest countries in terms of people who hold cryptocurrencies. Even more, many crypto companies with strong market capitalization are registered in the USA. Many sites and platforms are in fact based in the USA, making this country a real crypto hub.
👀 We can cite initiatives such as citycoin which is currently operational in Miami with the miami corner. It is a local-scale project where cryptocurrencies are used by citizens and the municipality.
The country is considering creating its own MNBC as well but some experts believe that development should take a few years. What seems to interest the USA more in creating its own cryptocurrency is the tax reason. This would prevent capital flight and a loss of related taxes.
India and the digital rupee
The Indian population is very invested in cryptocurrencies and has many engineers and blockchain developers.
The digital road should appear by 2023 according to government announcements. The MNBC will be supported by the Reserve Bank of India and will help digitalize the country's financial infrastructure. For the country that carries out a lot of trade with foreign currencies, this would then be an opportunity to reduce costs. It is also with this in mind that the'Iran decided to use cryptocurrencies for its commercial transactions.
The European Union via the European Central Bank (ECB)
The ECB has announced on several occasions that it is considering creating a digital version of the Euro. Christine Lagarde, then president of the ECB, announced that this could be beneficial for all European citizens. However, there is reluctance regarding the rise of cryptocurrencies.
There are many parameters to take into account that are not obvious. For example, there are countries in the European Union that do not use the euro. This risks making it more difficult to implement than to find a common agreement.
A bill will be discussed by the European Commission from 2023.
Final word on Digital Currencies in the world and their progress
We relied on data from theAtlantic Council which regularly updates the status of MNBCs around the world. Currently, more than 105 countries are exploring digital currencies. Taken together, this represents 95% of global GDP. This shows the impact this could have on the economy and the global financial infrastructure. Moreover, recently, BRICS countries have announced that they want to create their own digital currency as well.
This can prove to be a great springboard for many poor and emerging countries. These are the same countries that would benefit the most from it. There are indeed different uses for cryptocurrencies depending on the financial state of the country in question. For many analysts, cryptocurrency could improve financial inclusion. Cryptocurrencies indeed offer access to financial services to populations who were previously deprived of them.
Read our article on this subject on difference in crypto usage in rich and “poor” countries. For example, Argentinians will use bitcoin more to protect themselves from inflation. In Europe, it remains more of a speculative asset. This explains, for example, that remote villages in Salvador as the village of El Zonte uses bitcoin as its primary currency.
( You can consult the report on Global Finance which lists the most underbanked countries in the world).
Note: No financial advice is given in this or any other article on this blog. This is information of which you are the sole judge and master. Be responsible with your investments and only invest as much as you are willing to lose.
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