Emergence of Central Bank Digital Currencies

 As usual, an interesting piece from Irving's Blog (Below an intro, details and much more at the link) 

The Emergence of Central Bank Digital Currencies   By Irving Wladawsky   by IWB

Economist Digital Money V1Bitcoin was created in October of 2008 with the release of Bitcoin: A Peer-to-Peer Electronic Cash System, the original design paper which also introduced the blockchain architecture. A decade later, The Economist published a detailed evaluation of Bitcoin which succinctly concluded that “Bitcoin and other cryptocurrencies are useless.”

“Bitcoin, the first and still the most popular cryptocurrency, began life as a techno-anarchist project to create an online version of cash, a way for people to transact without the possibility of interference from malicious governments or banks,” it further argued. “A decade on, it is barely used for its intended purpose. Users must wrestle with complicated software and give up all the consumer protections they are used to. Few vendors accept it. Security is poor. Other cryptocurrencies are used even less.”

But last month, the May 8 issue of The Economist reached a very different conclusion in its assessment of central bank digital currencies (CBDCs), - i.e., e-dollars, e-yuans, or e-euros, - which it called “The digital currencies that matter.”

“Bitcoin has gone from being an obsession of anarchists to a $1trn asset class that many fund managers insist belongs in any balanced portfolio. … Yet, as our special report explains, the least noticed disruption on the frontier between technology and finance may end up as the most revolutionary: the creation of government digital currencies, which typically aim to let people deposit funds directly with a central bank, bypassing conventional lenders. These govcoins are a new incarnation of money. They promise to make finance work better but also to shift power from individuals to the state, alter geopolitics and change how capital is allocated. They are to be treated with optimism, and humility.”

Let me summarize a few of the special report’s key points.

Over 50 governments are exploring digital currencies. In October 2020, the Central Bank of The Bahamas issued the digital Sand Dollar, the first nationwide deployed CBDC. The Sand Dollar has the same value and consumer protections as the traditional Bahamian dollar, to which it can be instantly converted. The Bahamas also introduced the Sand Dollar prepaid card in collaboration with Mastercard, which can be used to pay for goods and services anywhere Mastercard is accepted.

China has a major e-yuan pilot underway. Over 500,000 individuals received 200 yuan ($30) from the government, which they can use to pay for goods and services using an e-yuan digital wallet offered by six commercial banks. Legally, e-yuans are as real as traditional hard cash. A few weeks ago, the US Digital Dollar Project announced that it will launch at least five programs over the next 12 months to explore the uses and designs of a US e-dollar. The European Central Bank has been developing the concept of the digital euro by conducting practical experiments and engaging with stakeholders and the broader public. And in April, the Bank of England announced the creation of a taskforce to coordinate the exploration of a potential UK CBDC. ... "