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In the United States, over the years, policymakers have researched, discussed and published multiple reports on whether the Federal Reserve should create a central bank digital currency without reaching a critical course of action.
The CBDC is a digital version of the traditional, government-supported paper Fiat currency, issued to promote broader access to financial services with economic inclusion and symbolic payment efficiency. CBCD improves the monetary policy of the global payment system, instead of increasing tokenized electronic payments and reducing cash use by providing accountability and stability. They mitigate the risk of financial instability resulting from the creation of unregulated private electronic payment instruments, such as memes/altcoins, tokenized assets, stubcoins, and corruption.
There are two types of CBDC. Retail CBDCs are used by the general public, and wholesale CBDCs are designed exclusively for interbank payments and securities transactions.
Vivek Raman, CEO of Etherealize.io, connects financial institutions to the largest, safe, open, and eco-friendly Ethereum ecosystem around the world.
“We don’t think that CBDCs will occur under a new administration in the US. CBDCs are against the principles of decentralization and freedom and are recommended to have a market of stable assets and tokenized assets.”
US CBDC ban
On January 16, Scott Bescent, a financial candidate for President Donald Trump, was later confirmed as the 79th U.S. Secretary to the US Treasury Department and testified before the Senate Finance Committee, which strongly opposes the introduction of CBDCs in the United States. “I don’t think there’s a reason the US has CBDC,” citing privacy and economic concerns.
Following the announcement of Scott Bescent on January 23, US President Donald Trump has signed an executive order officially banning the establishment, publication, distribution and use of CBDCs in the United States. Rhett Shipp, CEO of Avant, the Onchain Stablecoin Dollar Provider, said:
“In my opinion, CBDC is hurting the US as it reduces US dollar utility by increasing censorship and reducing privacy. Accepting stubcoins is a better path.”
CBDC development around the world
The global adoption rate of CBCD is monitored by Atlantic Council trackers, following CBDC developments in 134 countries, accounting for 98% of global GDP. So far, 66 countries have investigated CBDCs, with China leading the way. Only three countries issued them, including Nigeria, Jamaica and the Bahamas.
These countries are working to jointly develop coordinated legislation to regulate the issuance and distribution of CBDCs with recommendations and regulations of international organizations (see: Selva Ozelli, Introduction, p.2, sustainably investing in digital assets globally). Nevertheless, the complexly interconnected CBDC ecosystem (a growing number of central banks, commercial banks, payment service providers, and technology vendors) points to the IMF CBDC Virtual Handbook, an array of cybersecurity challenges exacerbated by data use and privacy protection vulnerabilities.
The most used CBDC in the world – E-CNY
China is the global leader in developing domestic and cross-border tokenized payment networks via digital currency. They began piloting the CBDC E-CNY program with 260 million wallet users in 17 state-level regions in 2019, making them the world’s most used CBDC pilot. According to Luray, the lieutenant governor of the People’s Bank of China (the central bank of the People’s Republic of China), China’s digital yuan, as in June 2024, traded totaling 7 trillion yuan ($98.2 billion). This figure is almost four times the 1.8 trillion yuan recorded by the end of June 2023.
This success of E-CNY comes from the ongoing efforts of the Chinese government to expand the scope of retail and wholesale CBDC transactions to promote E-CNY adoption. Use cases have been expanded to include payments for a variety of services, including public transport payments, income taxes, printing operations and more recently, electronic versions of Red Packets (Hongbo), traditional Chinese money (“purpose-bound digital payments”).
However, China’s efforts to develop CBCD are not limited to the country. “In Asia and the Pacific, central banks of China, India, Indonesia, Thailand, Singapore, Japan and South Korea are already piloting CBDCs.
According to Yifan, founder of Red Date Technology, President Donald Trump’s move to ban CBDCs in the US is expected to affect “retail CBDC projects over the next four years.” “But the point is, I don’t think that in the next decade, any country can develop a real retail CBDC,” he explained to me.
Red Date Technology is a Hong Kong-based decentralized cloud infrastructure company that has co-founded two companies that are taking the lead in the global CBDC pilot program.
China’s Blockchain-based Services Network (BSN) is a government-owned company and department that connects different payment networks. Universal Digital Payment Network (UDPN), which uses blockchain and smart contracts to create decentralized messaging systems and platforms, enables currency transfer and settlement of various digital currencies.
Last year, UDPN established digital currency sandboxes for commercial banks such as central banks, Standard Chartered Banks and Deutsche Banks, and tested how retail CBDC systems work, including quota management, circulation and wallets. The system is designed to support a variety of retail and wholesale crossbirder CBDC proof of concept (POC). Regulated periodic forms such as PayPal USD, Paxos Dollar, USDC, Hedera, and Tether. Dedicated digital payments for tokenized deposits to interoperate from various countries.
Tim Bailey, vice president of operations for Global Business and Red Dating Technology, explained in an interview.
“Stablecoins and CBDC are transforming digital payments, offering businesses 24/7 trading. As payments move more and more through the adoption of stubcoin and CBDC, the need to support new cross-chain payment rails has become clear. UDPN is a pioneer in the field, offering POCs as the first step to connect digital payments within the Greater Digital Currency Ecosystem. The UDPN architecture allows integration with almost any digital currency system, including CBCD, Stablecoin, tokenized deposits, or destination-bound digital payments via transaction nodes. Simplifies the adoption of digital currency in a wide range of applications, reducing the integration costs of financial institutions and central banks.”
EU Wholesale CBDC Initiative
Since 2020, the European Central Bank has been investigating CBDCs in a variety of capabilities, including the retail digital euro for consumers and national settlements between central banks.
In response to the US CBDC ban, on February 20, the ECB announced it would expand the development of a wholesale CBDC payment system to resolve inter-institutional transactions in order to move towards a two-phase, integrated tokenized financial infrastructure. In the first phase, ECB will build a wholesale CBDC platform. In the second phase, the ECB integrates the CBCD platform with systems such as the foreign currency exchange market, allowing CBDCs, tokenized deposits and tokenized assets to seamlessly interoperate within a blockchain-based financial system based on a shared ledger or suite of interconnected solutions. This initiative requires unified standards and regulations at the global level first at the eurozone level, then more harmonious and integrated European financial ecosystem.
Conclusion
The International Village Bank’s Innovation Hub, an international central bank organization, has been promoted to the disruption caused by Covid-19, in collaboration with various countries in CBDC research and cross-border pilot projects.
“We’ve seen a lot of experience in the world,” explains William Quigley, Cryptocurrency and Blockchain Investor and co-founder of Wax.io Blockchain and Stablecoin Tether (USDT).
“Every country will adopt CBDCs in tokenization of the financial sector and implement CBDCs at their own pace at retail and/or wholesale levels. With Fiat currency digitalised in the US, it is inappropriate for CBDCs to be frequently criticized for privacy concerns, potential threats to individual autonomy. However, the reality is that the growth of privately issued digital assets and stubcoins is even more inevitable as people are increasingly turning alternatives and countries relying on countries and countries that are more and more turning to non-US CBDCs.”
Except for the US, 19 of the G20 countries – Algentina, Australia, Brazil, UK, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Torquier, and even the European Union are developing advanced stages of the CBDC programme. “The good news for a country that doesn’t focus on CBDCS is that there is always a market for old bills and ancient coins,” pointed out Ozgluhonk, an ancient coin dealer, founder of Bank Costa Auction House and author of Queen Elizabeth II’s catalog of bills.
