As countries around the world race to launch a central bank digital currency (CBDC), some jurisdictions have slowed down or dropped out of the race al
As countries around the world race to launch a central bank digital currency (CBDC), some jurisdictions have slowed down or dropped out of the race altogether.
While many observers were pushing a narrative of urgency around CBDCs, some countries have decided that launching a CBDC isn’t currently necessary, while others have tested CBDCs only to dismiss them.
Each country had its own reasons, with global central banks providing very different insights on why their CBDC-related project didn’t go well or didn’t need to launch in the first place.
Cointelegraph has picked up four countries that have either stopped or paused their CBDC or CBDC-like initiatives based on publicly available data.
Denmark
Denmark is one of the top European countries in terms of digital payments, as its population relies on cash far less than other European nations.
The Nordic country was also one of the earliest countries to explore the possibility of issuing a CBDC, with the Danish central bank expressing interest in issuing a digital currency in 2016. The Danmarks Nationalbank then started working on digitizing the local fiat currency and the possible introduction of a Danish digital krone.
After only a year of research, the Danish central bank dismissed the idea of launching a CBDC, ruling that it would do little to improve the country’s financial infrastructure. The regulator argued that Denmark already had a “secure and effective” payments infrastructure in place, which provided instant payment options.
“It is not clear how retail CBDCs will create significant added value relative to the existing solutions in Denmark,” the Danmarks Nationalbank stated in a CBDC-related report in June 2022.
The central bank referred to associated costs and possible risks, also pointing out potential difficulties for the private sector. The bank still continues to monitor global CBDC development has not completely ruled out a CBDC in the future.
Japan
Japan is the third wealthiest economy after the United States and China, and also is the third largest pension market in the world.
The Japanese central bank — the Bank of Japan (BOJ) — released its initial report on CBDC development in October 2020 and subsequently started testing its digital currency proof-of-concept in early 2021, planning to finish the first pilot phase by March 2022.
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However, in January, former BOJ official Hiromi Yamaoka advised against using the digital yen as part of the country’s monetary policy, citing risks to financial stability.
In July 2022, the bank issued a report in which it claimed it had no plan to issue a CBDC, the “strong preference for cash and high ratio of bank account holding in Japan.” The regulator also emphasized that a CBDC, as a public good, “must complement and coexist” with private payment services in order for Japan to achieve secure and efficient payment and settlement systems.
“Nevertheless, the fact that CBDC is being seriously considered as a realistic future option in many countries must be taken seriously,” the report noted.
Ecuador
Ecuador’s central bank, Banco Central del Ecuador (BCE), officially announced its own electronic currency known as dinero electrónico (DE) back in 2014. Key drivers of the DE program were increasing financial inclusion and reducing the need for the central bank to hold and distribute large amounts of fiat currency.
As of February 2015, Ecuador managed to adopt DE as a functional means of payment, allowing qualified users to transfer money via a mobile app. The application specifically allowed citizens to open an account using a national identity number and then deposit or withdraw money via designated transaction centers.
While Ecuador’s DE is widely referred to as a CBDC, some industry observers have questioned whether it was really a CBDC because it was based on the United States dollar instead of a sovereign national fiat currency. The Ecuadorian government cited the support of its dollar-based monetary system as one of the goals behind its DE platform after it started to accept U.S. dollars as legal tender in September 2000.
According to online reports, Ecuador’s DE operated from 2014 to 2018, amassing a total of 500,000 users at its peak out of a population of roughly 17 million people. The project was eventually deactivated in March 2018, with the BCE reportedly citing legislation abolishing the central bank’s electronic money system. Passed in December 2021, the law stated that e-payment systems should be outsourced to private banks.
Years after dropping its central bank digital money initiative, Ecuador has apparently remained skeptical about the whole CBDC phenomenon. In August 2022, Andrés Arauz, the former general director at Ecuador’s central bank, warned eurozone policymakers that a digital euro could potentially disrupt not only privacy but also democracy.
Finland
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