Major Central Banks begin plans for the introduction of digital currencies; CBN still hawkish
April 6, 2021594 views0 comments
Several Central Banks are now joining hands in the introduction of the first digital national currency in a bid to match the innovation in the field achieved by the private sector in building digital currency for issuing, distributing and redeeming. This move comes following the eruption in recent times when most central banks decided to be hawkish by instituting a prohibiting law on the trading and exchange of digital currencies in those countries while other major apex banks are acting dovish.
The central bank digital currency in a simple term is a digital banknote that uses blockchain-based token to represent a digital form of fiat currency of a particular country. Similarly, the currency is centralised and regulated by the country’s monetary authority. Over time, regulatory authorities of traditional banks globally have grappled with the growing clout of popular digital currencies which they have noted to be a threat to the modern-day traditional banking system which operates under the purview of national central banks.
Although, no country in the world has officially launched a central-bank –backed digital currency, several apex banks, have, however, launched pilot programmes and research projects which will see the viability and usability of these currencies being determined by the central banks.
Accordingly, Christine Lagarde, President of the European Central Bank, in a monitored interview last month revealed that the institution could launch a digital currency within the next four years (2025) if her fellow policymakers grant the project the support and green light this summer. Though, the second decision of whether to roll out a digital currency or not will be made six months to a year after that following the due process for the potential launch of a digital currency by the central bank.
At the start of April, the Bank of Japan (BoJ) revealed that it has begun running tests on the central bank-issued digital currency (CBDC) as it says it’s ready to begin experimenting on the technical practicability of the main features and functions of the CBDC. According to Shinichi Uchida, the bank’s executive director, the central bank will launch a pilot programme that involves payment service providers and end-users.
This is, notwithstanding the fact that Patrick Njoroge, Kenyan Central Bank Governor, who announced the ambitious move by the bank to adopt virtual currency in its operations to help shield Kenya from foreign exchange losses and as well as lower, its debt levels as the digital currency appreciates. However, the regulatory body stated that the blanket move was to solve the myriads of fiscal and monetary challenges facing the Kenyan economy.
The CBDC proposition came into initiation by the Bank of England which has widely been followed by other countries’ apex banks such as People’s Bank of China, The central bank of Uruguay, Bank of Canada, amongst other nations are looking into the possibilities of introducing a central bank-backed digital currency while Ecuador has introduced the first national digital currency.
In the meantime, major central banks across the globe are looking at developing digital currencies to modernise their financial systems, ward off the hazards from cryptocurrencies and also to speed up domestic and international payments. Consequently, these major central banks are already in active engagement with the payment giant as they review plans to launch new digital currency known as CBDCs as a way to offer their customers or consumers new payment methods.