- CBDCs are under trial in many countries as governments and central banks try to control digital currencies via demand and supply
- Centrally issued currencies are have transparent functions, more efficient and entail faster international payments
- Pilot programs underway in China and Japan as countries like Israel, Russia, the UK continue to explore the possibilities via a white paper
Several fake schemes and scams have led to millions being washed away via investments in cryptocurrencies. Furthermore, speculative trading has kept many from taking the plunge in the latest asset class.
It has the highest risk category to its name and hence the birth of central bank digital currency was necessary. China has been exploring its digital Yuan since 2014 and has successfully launched the pilot program in several provinces.
France and Switzerland are the latest entrants to join the CBDC bandwagon with a different flavor. The cross border digital currency program will allow exchange of Euro and the Swiss Franc. Moreover, financial instruments will be converted to a Euro efficiently via this program.
Project Jura to use wholesale CBDC for trial
The Innovation Center of Bank of International Settlements is spearheading the project along with the Banque de France and Swiss National Bank. There are a host of private sector players involved like Credit Suisse Group AG, UBS Group AG, Accenture Plc and Natixis SA.
The French digital financial instrument will be put to test and develop it for mass adoption. It will strengthen trade and commerce between the two countries. A statement read that the test is just an experiment and should not signal the launch of CBDCs anytime soon.
The strong trend of digitizing payments has led Sylvia Goulard, Deputy Governor of the Banque de France, to explore opportunities with neighbouring countries to boost the future of the financial system. On the other hand, Swiss National Bank has experience of launching a CBDC with Project Helveti last year.
Use of fiat currency to wane out
As several countries try out CBDC programs, the use of fiat currency is far but over. The printing cost combined with difficulty in tracking the origin and destination of the fiat currency are major blockades that do not promote their use.
Digital currencies are transparent and can be tracked by the central banks for verification purposes or to track illicit money. Swift cross border payments will enable faster payments as well.
The efforts continue to rise on a global scale as banks need to foster financial requirements according to innovations and developments taking place in the financial system. CBDC benefits are many and their growth will improve the future of the financial ecosystem.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.