The future of money is digital. It is estimated that more than 80 per cent of central banks are considering launching a central bank digital currency (CBDC) or have already done so. Caribbean Central Banks are among the top ten with legal digital-tender already in use in The Bahamas, while Jamaica and the Eastern Caribbean are expected to follow soon.
The 2022 PricewaterhouseCoopers (PwC) CBDC Global Index analyses and ranks the leading retail and wholesale CBDC projects. The Index evaluates the current stage of CBDC project development also taking into account central bank opinion and public interest.
Overall, retail CBDC projects (digital currencies designed for public use) have reached greater maturity levels than wholesale projects (digital currencies used by financial institutions that have accounts with central banks), but the past year has seen progress on a number of successful wholesale pilots.
Retail projects in the Index are led by the Central Bank of Nigeria’s (CBN) eNaira, the first CBDC in Africa, and the Sand Dollar, issued by the Central Bank of the Bahamas as legal tender in October 2020, making the Bahamas the first country to launch a CBDC. China became the first major economy to pilot a CBDC in 2020 with the digital yuan, and as of March 2022 pilot programs are running in 12 cities, including Beijing and Shanghai.
On the wholesale side, the leading project in the Index is the combined effort of the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BoT) to launch the mBridge project, focused on developing a proof-of-concept prototype to enable real-time, cross-border foreign exchange payments on distributed ledger technology.
Also ranked highly is the work of the Monetary Authority of Singapore (MAS), with two new CBDC projects, as it continues the development of a wholesale CBDC for cross-currency payments.
The PwC report also provides an overview of stablecoins, digital currencies collateralised by, for example, a fiat currency, which can allow a bridge to be created between the traditional financial ecosystem and digital technologies.
Zia Paton, Digital Services leader, PwC in the Caribbean, said: “This year’s Index shows that central banks are ramping up activity in the digital currency space. Countries are at differing levels of maturity with CBDCs and each country has different motivating factors.
Increasing financial inclusion, facilitating cross border payments and controlling financial crime are all factors that come into play. Within our region, the success of the Sand Dollar in The Bahamas and planned CBDCs in Jamaica and East Caribbean, will likely spur CBDC development in other Caribbean territories where financial inclusion is one of the key desired outcomes.”
Ross Parker, Banking and Capital Markets Leader said: “It is especially important for financial institutions in the region to understand where central banks are with digital currencies and how citizens can benefit, because ultimately CBDCs will start flowing through the payment system and hit bank balance sheets. Careful consultation with central banks is also critical in clarifying the business case for CBDCs, from an inclusivity, financial performance and interoperability perspective.
“One thing that is clear, lowering the cost of payments in an economy and increasing financial inclusion provides value throughout the economy and for citizens. If CBDCs can ultimately enable more efficient payments that will benefit everyone.” (PR)
