It has been a global vision of most capitalist-oriented economies to move forward and grow harmoniously under a single system of governance, language, and yes, currency. With this system installed, acceleration and mitigation of strategic sectors are achievable.

The recent noise created by cryptocurrency has provided some government bodies to further explore a universal currency that is both digital and with an underlying value base.

This is timely as there are traditional use cases like the euro and other systems currently in places like the ASEAN and the inter-dynamics it produces for the member nations.

But, in today’s terms what is a CBDC or Central Bank Digital Currency?

CBDC – Central Bank Digital Currency

CBDCs are Digital tokens that borrow their form from cryptocurrency but, this time the decentralized concept is taken off, and the token is issued by the central bank of a country.

The underlying value of this token or central bank digital currency is based on the fiat money (currency) of the issuing country. So basically, it is very simple, your fiat gets a make-over and transfers from the physical tender to our eWallets taking a more robust digital form.

Declared Goals for using CBDCs

The new currency with all its advanced features is to provide businesses and consumers with a higher quality of reliability, privacy, convenience, accessibility, transferability, and most important security. All these while reducing process-related costs like transfers.

Different Kinds of CBDCs

Now, similar to some features of your current fiat, there is the retail and wholesale currency. Retail CBDCs are the ones used by consumers and businesses for transactions.

And since this is a government-backed token it has eliminated intermediary risks only present with private issuers of tokens.

The wholesale currency is your currency in the warehouse. They are like putting reserves in a central bank.

Countries Actively Exploring the Potential of CBDCs

Asia Pacific has been an agile testbed for the CBDCs and China is in the lead in issuing a pilot test of its e-CNY digital currency around 2019, though as early as 2014 China is already in the exploration mode.

Together with Singapore and Hong Kong, China has been leading the development even in global proportions due to their market’s maturity in transaction technologies that involve transfer, and purchases.

Thailand and India follow China for being in the advanced stages of development and are expected to do a round of pilot tests in the near term.

Australia in August 2022 announced a CBDC pilot but limited in scale and scope. Interestingly, Japan, Singapore, Malaysia and Korea also have started developments and are within the stage of proof-of-concept along with other 12 more Asian countries in the early stages.

Conclusion

CBDCs are well positioned and the potential issuers and project proponents took ample amounts of time to study behaviours and risks posed by the decentralized, blockchain-powered cryptocurrency.

Unlike your favourite token, the CBDC’s value is backed by the government, hence it mimics the fiat. The developments are still too early to deduct a more detailed scenario, but these developments are moving fast and provide an exciting approach to the future of global communities.