How central bank digital currencies will take over the world
First central banks ignored cryptocurrencies, then they mocked them, next they fought them and now they are building their own. Before long central bank digital currencies will be in use, with possibly startling consequences. What will it mean for privacy and personal freedoms? And could the backstop to banking become the banking system itself?
This is the year of central bank digital currencies.
Twelve years on from the launch of bitcoin, six years after the launch of Tether – the first stablecoin backed by US dollar reserves – and just eight months since Facebook’s announcement of the Libra cryptocurrency project, central banks are suddenly getting set to launch their own new forms of digital money.
For now, live pilot projects are still mostly restricted to emerging markets such as the Bahamas, the countries of the Eastern Caribbean Currency Union (ECCU) and Cambodia, where central banks are responding to excessive dependence on physical cash that burdens businesses and individuals with high handling costs.
Announcing the test phase of a digital Eastern Caribbean dollar to run over a private permissioned blockchain on IBM’s Hyperledger Fabric last year, Timothy Antoine, governor of the Eastern Caribbean Central Bank, noted that 80% of payments in the ECCU are expedited through cash and cheques.