ACCORDING to Haydn Jones, a Blockchain and Crypto Specialist at PwC UK, the success of eNaira, Nigeria’s central bank digital currency (CBDC), which was launched in the fourth quarter of last year, may inspire similar ventures, particularly in nations with poor financial inclusion.
Jones said this in a statement following the release of a PwC analysis ranking CBDC projects around the world and the differences made by central banks to keep up with the trend.
“This year’s index shows that central banks are ramping up activity in the digital currency space. Countries are at different levels of maturity with CBDCs and each country has different motivating factors. Increasing financial inclusion, facilitating cross-border payments and controlling financial crimes are all factors that come into play. We expect CBDC research, testing and implementation to intensify in 2022. The success of eNaira is likely to spur CBDC development in countries where financial inclusion is one of the key desired outcomes,” Jones points out.
The new report analyses CBDC projects across the world, emphasising that “the future of money is digital”.
It has been estimated that more than 80% of central banks are considering creating CBDCs or have already done so, with eNaira being the first in Africa to do so.
The PwC CBDC Global Index research distinguishes between retail and wholesale CBDC initiatives, concluding that the former is more developed while just a few countries are making significant progress in the latter’s development.
Retail CBDCs are intended for the general public and are primarily supported by peer-to-peer (P2P) transactions, whereas wholesale CBDCs are mostly used by financial institutions. According to the report, retail CBDC projects are more mature than wholesale CBDC projects, however several successful wholesale pilots have made headway in the past year.
According to the research, eNaira and the Bahamas Sand Dollar, which was issued as legal cash in 2020, making the Bahamas the first jurisdiction to introduce a CBDC, are leading retail projects.
With the digital yuan, China became the first large economy to test a CBDC in 2020. According to the PwC index, trial programs were active in 12 cities as of March 2022, including Beijing and Shanghai.
On the wholesale side, the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BoT) have collaborated to launch the mBridge project, which is focused on developing a proof-of-concept prototype to enable real-time and cross-border foreign exchange payments using distributed ledger technology.
The efforts of the Monetary Authority of Singapore (MAS), which has two new CBDC initiatives in the works as it continues to create a wholesale CBDC for cross-currency payments, is also highlighted in the study.
The report also goes over stablecoins, which are digital currencies that are pegged to fiat currencies like USDT and can be used to provide a bridge between the traditional financial environment and digital technology.
While speaking, West Africa Financial Services Leader and Chief Economist, PwC Nigeria, Andrew Nevin, also stated that: “CBDCs will transform the payment system, as low value-added transactions become possible in a costless and secure way for everyone. The success could also catalyse more complex and transformative CBDC uses, including blockchain identity management, land registry, and supply chain verification. As each of the use cases develops, we can bring more people into the economic and financial system and lift tens of millions out of poverty.”
