Looking back at 2020, central banks of various countries are racing to develop and test digital currencies. The COVID-19 pandemic has accelerated the trend of cashless payments, and nations are in an effort to develop central bank digital currencies (CBDCs). Many countries have adopted a positive attitude towards their development.
According to the data released by the Bank for International Settlements (BIS), among the 66 central banks worldwide, 80% of central banks noted they are developing digital currency technology. Last year, this proportion was 70%; in addition, about 20% of central banks reckoned that they are now likely to issue digital currencies in the next six years.
In terms of advancing the progress of CBDC, China has always taken the lead in its development among the world's major economies. In 2014, with the support of the governor Zhou Xiaochuan, the People's Bank of China established a legal digital currency research group and clarified the strategic goal of issuing digital currency. In April 2020, internal closed pilot tests of CBDC were conducted in Shenzhen, Suzhou, Xiong'an, Chengdu, and Beijing Winter Olympics scenes in the near future.
Oct. 8 saw the Shenzhen Municipal People's Government worked together with the People's Bank of China to launch a pilot digital RMB red package. The pilot was held in Shenzhen, and each red packages amounted to ￥200, with a total of 50,000 red packages.
Dec. 4 also witnessed Suzhou - a city in Jiangsu Province - announced that it will issue 20 million yuan of digital RMB consumption red packages to eligible Suzhou citizens. Each red package amounts to ￥200, and the total number is 100,000, which will be distributed by lottery.
Recently, more and more central banks around the world have begun to pay attention to digital currency. However, U.S. regulators seem not interested in digital currency and keep putting pressure on Facebook, which plans to launch Libra digital currency.
However, in 2020, the Fed's attitude towards CBDC has changed significantly. In February of this year, Federal Reserve Board Governor Lyle Brainard made a speech at the Stanford University Business School and made it clear that the Federal Reserve is conducting research and experiments on the potential use cases of distributed ledger technology and its digital currency.
On May 29, the Digital Dollar Project released its first white paper, aiming to provide a framework for creating digital currency from the U.S. central bank.
On August 13, Lyle stated that the Federal Reserve is building and testing an envisioned digital currency. The goal of the plan is to enhance the Federal Reserve's understanding of digital currency.
In 2020, the European Central Bank (ECB) has been strengthening its work on the digital euro. For example, it would set up a senior work team to study CBDC, develop a CBDC payment system that protects user privacy, and release a "European chain" ledger system based on the R3 alliance platform.
On October 2, the ECB released a "Digital Euro Report" for the first time, focusing on the relevant issues involved in retail CBDC, and plans to decide whether to launch CBDC project in the mid-2021.
Recently, ECB President Christine Lagarde noted that the possibility of launching a digital euro is under exploration, which is expected to be launched within two to four years. Lagarde has officially claimed the launch of a public consultation to discuss the feasibility of issuing a digital euro.
The Bank of Canada has cooperated with the Monetary Authority of Singapore and the Bank of England to explore the development of cross-border and cross-currency payment systems and delivered tangible results. In February 2020, the Bank of Canada announced the start of the development of a retail CBDC in response to the emergence of a "cashless economy" and the challenges of private digital currencies.
The Bank of Japan's enthusiasm for CBDC has greatly increased since 2020. It has formed a working group with the Bank for International Settlements and the central banks of the United Kingdom, Canada, Sweden and other countries to jointly explore digital currencies. In addition, Japanese executives frequently expressed their supports to issue a CBDC.
The Bank of Korea began to develop retail CBDC in April 2020, intending to conduct tests in three steps. It has launched a 22-month CBDC pilot project and is expected to complete the relevant work by the end of 2021.
The Russian legislature body passed a bill called "On Digital Financial Assets" in July this year. On October 13, the Central Bank of Russia published a report called "Digital Ruble" on its official website. The report emphasized that the central bank is currently evaluating and studying the feasibility of the "digital ruble" project.
In March of this year, the Bank of England released a discussion report on digital currencies. According to the report, "If the UK is to introduce CBDC, it will be priced in British pounds. But the Bank of England has not yet decided whether to introduce it." The head of the Bank of England Bailey also noted in July that "we are studying whether we should create a digital currency."
The Bank of France announced in July that eight companies including HSBC, Accenture, and Societe Generale were shortlisted for its digital currency pilot program. They will jointly look to modernize inter-bank settlement through central bank digital currencies and improve their cross-border payment conditions.
In this November, the Bank of Australia announced to launch a project so as to explore the potential uses and significance of wholesale CBDC using distributed ledger technology (DLT). The project is expected to be completed around the end of 2020.
In October of this year, Brazil’s central bank governor Roberto Campos Neto held that Brazil may be ready to use a CBDC by 2022. Neto said that by then, Brazil will have an interoperable instant payment system and a "trusted" and "convertible" international currency, which are all the elements required for a digital currency.
BIS stated that the conceptual experiment jointly conducted by the Swiss National Bank (SNB) and financial infrastructure operator SIX Digital Exchange (SIX) to integrate digital assets with CBDC has been successfully completed. This project is to explore how open cooperation can enhance understanding and consensus on the impact of digital innovation on the financial system.
In October of this year, the Central Bank of the Bahamas announced that "Sand Dollar" - a state-backed virtual currency - can now be used nationwide. Therefore, the Bahamas became the first country in the world to officially launch CBDC.
2020 is the year of the rise of CBDC. Many countries have made substantial progress in developing CBDC. For countries that plan to launch CBDCs and how to implement and strengthen the supervision of digital currencies is an urgent issue for central banks to solve.