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CBDCs of the World: The Benefits and Drawbacks of National Cryptos, According to Different Jurisdictions


CBDCs of the World: The Benefits and Drawbacks of National Cryptos, According to Different Jurisdictions

State-backed digital currencies are widely discussed among many countries worldwide, from China to Tunisia. Here are some major examples of CBDCs from different parts of the world

This month alone, at least three separate countries have reported on their prospective central bank-issued digital currencies (CBDCs): The Republic of the Marshall Islands (RMI) announced the creation of a specially dedicated nonprofit organization to support its digital currency that is already being developed. Meanwhile, the central bank of Russia said it was considering its own cryptocurrency (albeit not in the near future), while the National Bank of Ukraine released a report on the matter.

The concept of CBDCs has been steadily drawing the attention of numerous jurisdictions worldwide, but will it prove to be an efficient solution? It is time to delve deeper into the idea of state-backed cryptocurrencies and go through some major examples.

Nations With a Clear Stance on National Cryptocurrency

The state’s answer to the growing popularity of crypto

CBDCs, or national digital currencies, are digital assets that are issued and controlled by a federal regulator.

By design, CBDCs are fully regulated by the state. They don’t aim to become decentralized like most cryptocurrencies — instead, they simply represent fiat money, only in a digital form. Each CBDC unit acts as a secure digital equivalent of a paper bill and is normally powered by blockchain or some other form of distributed ledger technology (DLT).

Consequently, if a central bank issues a CBDC, it becomes not only its regulator but its clients’ account holder as well, therefore taking on the role of conventional, brick-and-mortar banks. Alternatively, a central bank can issue a digital currency in a decentralized manner, similar to how physical cash is distributed.

CBDCs could be seen as central banks’ response to the growing popularity of cryptocurrencies, some of which, however, deliberately attempt to bypass regulators’ purview. CBDCs, in turn, aim to take the best from cryptocurrencies, namely the convenience and security, and combine those features with the time-tested characteristics of the conventional banking system, in which money circulation is regulated and reserve-backed.

Indeed, according to a 2019 report issued by the Bank for International Settlements (BIS) — an organization based in Switzerland and comprises 60 of the world’s central banks — as much as 70% of financial authorities worldwide are conducting research into CBDC-issuance. However, concrete plans for implementation and motivations vary significantly depending on the country.

The BIS survey studied 63 central banks worldwide, 41 of which are based in emerging market economies, and 22 of which are in advanced economies — together representing almost 80% of the world’s population and more than 90% of its economic output. Of these, 70% were found to be already — or soon to be — engaged in theoretical CBDC research.

Notably, the general perception of a CBDC has been shifting toward positive. For instance, the head of the International Monetary Fund (IMF), an entity which once denounced the Republic of the Marshall Islands for its plan to issue a state-backed cryptocurrency, has recently declared that the international community should “consider” endorsing the idea.

“I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy,” IMF Managing Director Christine Lagarde declared, noting, however, that she is “not entirely convinced” on the concept, yet.



Status: Adopted

Release date: 2015

In 2015, Tunisia became the first country in the world to issue a blockchain-based national currency called eDinar, also known as Digicash or BitDinar.

The asset was created with the participation of Monetas, a Switzerland-based software company (its CEO has gained notoriety due to the Tezos scandal), which has put the digital version of Tunisia’s dinar on blockchain rails.

Similarly to cash money, eDinar’s distribution and issuance is under the purview of a governmental body: La Poste, or La Poste Tunisian (LPT). Monetas CEO Johann Gevers commented on the launch:

“The Monetas deployment in Tunisia is the first application for a full ecosystem of digital payments. With the La Poste Tunisienne Android application powered by Monetas, Tunisians can use their smartphones to make instant mobile money transfers, pay for goods and services online and in person, send remittance, pay salaries and bills, and manage official government identification documents.”

There are transaction fees featured in the eDinar system — albeit they are insignificant, as the maximum amount is capped at just 1 dinar ($0.34), which is typical for conventional cryptocurrencies.

Now, the North African country seems to be contemplating the next step: In April, El Abassi, the governor at Banque Centrale de Tunisie — the local central bank — announced that it had created a working group that was studying the issuance of a sovereign bitcoin (BTC) bond.

Abassi added that bitcoin and blockchain technology offers central banks an efficient tool to combat money laundering, manage remittances, fight cross-border terrorism and limit informal economies.


Status: Adopted

Release date: 2016

Senegal is also one of the earliest adopters of a national digital currency, having issued its blockchain-based eCFA — named after the CFA franc, the Senegalese paper-based fiat currency — in December 2016.

Like a regular CBDC, eCFA is fully dependent on the central banking system and can only be issued by an authorized financial institution. The currency was created jointly by local bank Banque Régionale de Marchés (BRM) and eCurrency Mint Limited, an Ireland-based startup that assists central banks in creating their own digital fiat currencies.

The eCFA has been designed to be distributed alongside paper money as legal tender. In a shared statement, BRM and eCurrency Mint declared:

“The eCFA is a high-security digital instrument that can be held in all mobile money and e-money wallets. It will secure universal liquidity, enable interoperability and provide transparency to the entire digital ecosystem in WAEMU.”

Indeed, if proven efficient, the eCFA could be extended to other West African Economic and Monetary Union (WAEMU) member states, including Côte d’Ivoire, Burkina Faso, Benin, Togo, Mali, Niger and Guinea-Bissau.

The Marshall Islands

Status: Adopted

Release date: 2019 (expected)

The Republic of the Marshall Islands (RMI) — a small island country in the Pacific Ocean with a population of roughly 53,000 people — is a presidential republic in free association with the United States, which is why it has historically used the U.S. dollar as its official currency.

However, in March 2018, it introduced another legal tender: its own cryptocurrency succinctly dubbed Sovereign (SOV). The digital asset was first introduced in late February the same year, when the government — the country has no central bank — passed the Declaration and Issuance of the Sovereign Currency Act. David Paul, minister-in-assistance to the president of the Marshall Islands, told Reuters at the time:

“As a country, we reserve the right to issue a currency in whatever form it is, whether in digital or fiat form.”

Further, Paul added that SOV is made collaboratively with Israeli fintech startup Neema and will be publicly released through an initial coin offering (ICO), with a seperate presale. Neema CEO Barak Ben-Ezer told the press that SOV “is completely decentralized and the government cannot control the money supply” after the ICO.

As Peter Dittus, chief economist for SOV, told Cointelegraph, the decision to develop a national digital currency is backed by several reasons.

First, Dittus says, developing countries such as RMI struggle with the high costs of remittances, and having a crypto legal tender creates a situation in which the solution to costly payments is integrated into the monetary system itself. Additionally, a central bank-managed fiat currency is costly to implement and to run, wherein “for a small country the costs clearly outweigh the benefits.”

In September 2018, however, the SOV project was criticized by major financial organizations, including the IMF and the U.S. Treasury Department. Specifically, the IMF warned about the potential risks of using a cryptocurrency as legal tender, stating that:

“The potential benefits from revenue gains appear considerably smaller than the potential costs arising from economic, reputational, AML/CFT, and governance risks.”

Further, in November, the RMI President Hilda Heine narrowly survived a no confidence vote that was prompted by her plans to introduce the national digital currency, among other things.

Nevertheless, in January 2019, the team behind SOV announced that a national cryptocurrency for the Marshall Islands was still being actively developed and that it intends to launch SOV sometime this year.

In early June, the RMI established the SOV Development Fund, a nonprofit organization to support the government in the implementation of a national cryptocurrency.

According to its press release, the fund will be fully independent, with a board of seven directors, of whom two will be appointed by the government and two nominated by SFB Technologies — the firm that is developing SOV’s blockchain infrastructure.

The remaining directors will be selected unanimously by the aforementioned four from among international experts in blockchain, banking and monetary policy.

In a video presentation to the Blockchain for Impact Summit at the United Nations Headquarters in New York, the minister in assistance to the president, David Paul, said, “We are designing SOV in a way that will not place any burden on the government’s finances. The currency funds itself.”


Status: Adopted

Release date: 2018

In February 2018, the government of Venezuelalaunched a national cryptocurrency called Petro (PTR), or sometimes Petromoneda.

Petro was first announced in December 2017 via national television, when President Nicolas Maduro declared that his government was planning to issue a cryptocurrency backed by the country’s oil, gold and mineral reserves. In January, he elaborated, stating that 100 million petros backed by an equivalent number of barrels of oil was going to be issued in the near future. According to Maduro, a number of fiat currencies — including the Russian ruble, the Chinese yuan, Turkish lira and the euro — are freely convertible with Petro.

Notably, the currency was designed to dodge the U.S. sanctions that hinder the local economy — or, as Maduro put it: to fight the financial “blockade” erected by the U.S. President Donald Trump’s administration. In response, the U.S. has issued an order to effectively restrict American investors from participating in the ICO for Petro, which started on Feb. 20, 2018.

In March, Nicolas Maduro claimed that a total of $5 billion was raised during the presale period — which would make it one of the largest ICOs to date, putting the $2 billion Telegram ICO and $4.2 billion token sale of EOS behind it. However, as Steve Hanke, an applied economist at Johns Hopkins University, has pointed out, those claims “aren’t believable” because no independent audits have verified them.

Further, Petro allegedly has ties with Russia, as, according to anonymous sources cited in a Time article, the cryptocurrency has been receiving Russian support since 2017, particularly due to the appeal of bypassing Western sanctions also imposed on the country. As the Russian state bank allegedly told the publication, “People close to Putin, they told him this is how to avoid the sanctions.” However, in March, those claims were denied by Konstantin Vyshkovsky, the head of the Russian Finance Ministry’s State Debt Department.

Meanwhile, Maduro continues to integrate Petro into the troubled, hyperinflated economy. For instance, he has announced the launch of a Petro-funded crypto bank to support initiatives from the youth and students, while Venezuelan Minister of Habitat and Housing Ildemaro Villarroel declared that Petro will be used to fund the construction of houses for the homeless.

Moreover, even the pension bonuses have been converted into Petro, which triggered a protest led by seniors who did not believe in the oil-backed coin. According to a local labor organizer, paying pensions in Petros violates Venezuelan law.

In November 2018, after a series of delays, Petro was finally launched. Soon, crypto enthusiasts pointed out that its white paper seems to be a blatant copy of Dash’s documentation available on GitHub.

As of press time, Petro is still not listed on any major cryptocurrency exchange. According to local and South American experts cited by tech media publication Wired, Petro is a “stunt” and a “smoke curtain” to cover up hyperinflation.

Despite the questionable progress with a national cryptocurrency and, more importantly, a larger economic crisis in his country, in January 2019, Maduro was sworn in for a second term.

He has previously declared that the country was preparing to launch yet another, “even more powerful” cryptocurrency called Petro Gold, this time backed by the country’s reserve of precious metals, meaning that Venezuela might have to witness more cryptocurrency-related experiments from the Maduro government.


Status: Adopted

Release date: 2019

In April 2018, the Iranian government performed a major crackdown on cryptocurrencies, with local banks being banned from all crypto dealings. Days after, an official declared that an experimental model of a domestic digital currency had been prepared.

Indeed, similarly to Venezuela, Iran might be hoping to use its cryptocurrency to bypass Western sanctions: In May 2018, Mohammad Reza Pourebrahimi, the head of the Iranian Parliamentary Commission for Economic Affairs, referred to cryptocurrencies as a promising way for Iran and Russia to avoid U.S. dollar transactions, as well as a possible replacement of SWIFT (since all Iranian banks have been delisted from the global interbank payment system).

Additionally, Iran has reportedly been negotiating with Switzerland, South Africa, France, the United Kingdom, Russia, Austria, Germany and Bosnia to conduct financial transactions using cryptocurrency.

In January 2019, four local banks developed a gold-pegged cryptocurrency called PayMon amid rumors that Iran was going to issue its state-backed cryptocurrency.

According to reports from local media, the crypto asset has been developed in conjunction with three private banks — Parsian Bank, the Bank Pasargad and Bank Mellat — and one state-owned financial institution, Bank Melli Iran. Iran Fara Bourse, a Teheran-based over-the-counter (OTC) exchange for securities and other financial instruments, will reportedly list the new cryptocurrency.

The director of Kuknos, a blockchain company responsible for the technical side of the project, said that the new crypto asset is the way to tokenize assets and excess properties of the banks. One billion PayMon tokens will be released initially, as per the plan.

Interestingly, the launch of PayMon came less than a week after Iran’s central bank published a draft on future cryptocurrency regulations. According to Aljazeera, the authorities plan to partly reverse the ban on digital currencies but will introduce limits on the amount of cryptocurrencies that an individual can hold.

UAE and Saudi Arabia

Status: Pilot

Release date: 2019-2020 (expected)

In January 2019, the United Arab Emirates and Saudi Arabia announced an agreement to collaborate on the creation of a cryptocurrency for cross-border trading, confirming previous reports.

The project is part of the Strategy of Resolve, a larger agreement between the two countries comprised of seven joint initiatives. According to the UAE official news agency Emirate News Agency, the cryptocurrency “will be strictly targeted for banks at an experimental phase with the aim of better understanding the implications of blockchain technology and facilitating cross-border payments.”

Related: Safe Space: A Guide to Special Economic Zones for Crypto, From China to Switzerland

The initiative reportedly seeks to protect customer interests, create standards for technology and consider the cybersecurity risks, while also determining the impact of centralized currencies on monetary policies, the agency reported.

In February, Saudi Arabian financial news portal Argaam reported that six unnamed commercial banks from Saudi Arabia and the UAE had joined the digital currency project dubbed Aber, with a scheduled implementation during the next 12 months. The article also noted:

“The currency’s official issuance is conditional on the outcomes of the ‘proof-of-concept’ stage. The Saudi Arabian Monetary Authority (SAMA) and the UAECB will decide on the feasibility of the currency’s practical applications.”


Status: Pilot

Release date: Unknown

In November 2017, the Central Bank of Uruguay (BCU) presented a six-month pilot plan for the issuance and use of the digital version of the Uruguayan peso. The institution stressed that it “is not a new currency, it is the same Uruguayan peso that, instead of having a physical support, has a technological support.”

According to the scheme — the starting date of which has not been specified — a total of 10,000 mobile phone users of Antel, the state-owned telecommunications company, would be able to download an app with an integrated digital wallet. The first issue of digital tokens will consist of 20 million Uruguayan pesos, the press release notes.

Other players participating in the pilot scheme, apart from the BCU and Antel, are RGC, the system provider; IBM, for storage support, circulation and control; IN Switch, for user management and transfers; and RedPagos, for ticketing.

The head of the BCU elaborated on the plan, adding that Uruguay “is very much in the vanguard” of digital currency development:

“It will be a process of trial and error, success and failures. […] This must have the same soundness as normal currency, but sooner or later it will be implemented in Uruguay.”

However, there has not been any major update to the pilot scheme for more than 12 months.


Status: Pilot

Release date: Unknown

Singapore shares a similar experience with Uruguay in terms of issuing a CBDC, as its project has also been stuck in the experimentation phase.

In June 2017, the Monetary Authority of Singapore (MAS) released a report regarding the so-called Project Ubin, a blockchain-powered plan to put a “tokenized form of the Singapore Dollar (SGD) on a DLT.” The project is a collaboration between the central bank and blockchain consortium R3, which is focused on the development of a blockchain pilot to facilitate cross-border payments.

However, in January 2018, Ravi Menon, the managing director of the MAS, suddenly criticized the idea of CBDCs, specifically in the public context. In an interview with the Financial Times, he questioned the reasoning behind central banks issuing digital currencies to the nonbank public.

“If there’s any sense of nervousness about the banks, you will have a bank run; everybody is going to go into the central bank [with their deposits]. […] And, if people placed their deposits with central banks, who’s going to extend credit?”

As with Uruguay, there have not been any updates on the Ubin project since.


Status: Pilot

Release date: Unknown

The Bank of Thailand (BOT) has been notably bullish on the concept of CBDCs. In November last year, the central bank’s governor, Veerathai Santiprabhob, argued that it will take three to five years for countries to switch from using cash to using digital currencies. However, the official noted that digital currency would not replace fiat money right away “because of complication, a readiness of people and an efficiency of technology.”

Meanwhile, the BOT has been studying the prospect of releasing its own CBDC. The project details first surfaced in June 2018, when Santiprabhob revealed details that the central bank had teamed up with a number of local banks to develop a “new way of conducting interbank settlement” using a CBDC.

According to the BOT, releasing its own cryptocurrency would reduce the transaction costs and validation time “due to less intermediation process needed compared to the current systems.”

In May 2019, more details were published. Thus, the CBDC project, dubbed Inthanon, has been developed by blockchain consortium R3 and global IT company Wipro Limited to be used for interbank settlements in Thailand, according to the latest press release. Specifically, the solution will reportedly be used by the BOT and eight local commercial banks.



Status: Research

Release date: Unknown

According to the latest reports, the head of Russia’s central bank, Elvira Nabiullina, has said that, while the launch of a CBDC is being explored, it won’t be released in the near future.

Specifically, Nabiullina suggested that the robustness of blockchain technology should be ensured before any prospective CBDC issuance:

“If we are talking about a national currency that works as a whole in the country — that is, not about private assets — of course, this requires the technology to provide reliability and continuity. Technologies must be mature, including distributed ledger technologies.”

Further, Nabiullina discussed CBDCs in the context of cash-free societies, arguing that, while some countries have made significant progress and become almost cashless at this point, in other jurisdictions, cash remains in high demand:

“It’s not so much because people want to perform some dubious operations. People often value their privacy, anonymity. Of course, the spread of non-anonymous digital currencies indicate in some sense society’s readiness.”

In April, the country’s central bank released a policy brief on CBDCs, in which it argued that they could represent a less risky and more liquid type of asset that could potentially reduce transaction costs in the economy. However, the paper stressed CBDCs’ lack of anonymity as a potential disadvantage in comparison to cash.

Russia’s authorities have also been working on the so-called CryptoRuble, a national stablecoin. However, the project has been accompanied by contradicting statements from various officials, and, as Cointelegraph previously reported, there are reasons to believe that a ruble-pegged stablecoin might not turn out to be very stable in the end.


Status: Research

Release date: Unknown

Sweden’s central bank, Riksbank, has been conducting research since 2017 into a project called e-Krona, a potential DLT-based currency that could be used as a “complement to cash.” In September that year, Riksbank published the first report on e-Krona, followed by an action plan.

The papers note that Riksbank “has not yet taken a decision on whether to issue an e-Krona and the aim is not for an e-Krona to replace cash.”

However, Riksbank’s reports on e-Krona mention the dropping popularity of cash in the country as one of the main reasons for studying the CBDC concept. For instance, the latest survey conducted by the central bank in 2018 found that only 13% of Swedish residents paid for their most recent purchase in cash, while the corresponding figure for 2010 was 39%.

Essentially, Riksbank believes that e-Krona could operate under two systems: a value-based one and a registered-based one. The latter version would have digital currency balances stored in accounts on a central database — potentially underscored by blockchain — while a value-based e-Krona would be stored separately on “deposited currency accounts.”


Status: Research

Release date: Unknown

The People’s Bank of China (PBoC) has been researching the concept of CBDC for quite some time, with a specific institute named Digital Currency Research Lab established for this very purpose. However, it seems that the country is in no hurry to issue a national digital currency. In March 2018, governor of the PBoC, Zhou Xiaochuan, expressed the bank’s cautious position regarding the matter of blockchain technology:

“If it spread too rapidly, it may have a big negative impact on consumers. It could also have some unpredictable effects on financial stability and monetary policy transmission.”

Zhou also declared that digital currency will ultimately diminish cash circulation, while stressing that the PBoC “must prevent substantial and irreparable damages” to the domestic economy. Nevertheless, according to China Daily, he also claimed that the development of digital currency is “technologically inevitable.”

In June 2018, the Digital Currency Research Lab at the PBoC filed a new patent for a digital wallet that would allow users to track their transaction histories.

Three months later, it opened a new fintech research center in Nanjing, the capital of China’s eastern Jiangsu province. The establishment will focus on the PBoC’s testing of its developed digital currency prototype, according to reports.

South Africa

Status: Research

Release date: Unknown

Although there are few details on a South African CBDC at this point, the local central bank published a tender last month that mentions the issuance of “electronic legal tender — a central bank digital currency issued and backed by the South African Reserve Bank (SARB).”

The tender — which has been closed at this point — was reportedly created to assist the SARB in studying CBDCs.

The CBDC would be issued at one-to-one parity with the South African rand and accepted by businesses and the government, the paper mentioned. It also should be able to facilitate person-to-person transfers of value without clearing and settlement, the tender said, while consumers must be able to use the CBDC without using a bank account.

European Union

Status: Research

Release date: Unknown

While it is too early to say if EU countries could be joining the ranks of jurisdictions that have adopted the concept of CBDCs, in May 2019, a European Central Bank (ECB) official highlighted the benefits of state-backed digital currencies.

More specifically, Vitas Vasiliauskas — chairman of the board of the Bank of Lithuania and a member of the governing council of the ECB — discussed whether CBDCs should be wholesale, retail or both.

He stressed that CBDCs should serve as a medium of exchange, a means of payment and a store of value, reflecting qualities of the current forms of central bank money, but not a conventional reserve account or a private crypto asset. In the event of a release of a retail CBDC, it would be available to the general public, while access to the wholesale one would be open to financial institutions only.

Among the potential benefits of the CBDC, Vasiliauskas named increased efficiency of payments and securities settlements, as well as the reduction of counterparty credit and liquidity risks. The interest-bearing retail CBDC could purportedly improve the transmission of monetary policy and strengthen the pass-through of the policy to deposit and lending rates. However, Vasiliauskas further warned:

“The amount of cash in circulation is declining in some countries. This could mean that one day, even if it seems like a distant prospect — every single person will have to have an account with a private entity just to make payments. Unfortunately, this may lead to increased levels of financial exclusion.”

A retail CBDC would thus ensure that people continue to have access to the central bank’s money, Vasiliauskas said, and could eventually have positive effects on financial stability. In the meantime, he believes that one of the key issues the EBC should consider is the CBDC’s adherence to Anti-Money Laundering (AML) requirements and the way it can apply these standards to anonymous forms of CBDCs.

Unclear future: Some countries denounce the idea, and a well-executed CBDC is not yet here

It is worth noting that despite the potential benefits of having a CBDC, some jurisdictions have ultimately decided against the idea.

The reasons vary: For instance, Japanese officials explained that their society wasn’t ready to give up cash, as it forms a substantial part of the local economy. The U.K. had to halt its CBDC-related research due to the country’s looming withdrawal from the EU, while South Korean officials even argued that a CBDC is an expensive concept that might destabilize the market and “cause a moral hazard.”

Overall, the actual economic implications of issuing a state-backed cryptocurrency remain largely unknown, as even the jurisdictions that have adopted CBDCs have yet to launch them in a fully fledged form. However, given the steadily increasing amount of countries that have been studying the concept, a CBDC might soon arrive, prompting others to follow suit or give up the idea altogether.

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