The CBUAE (Central Bank of the United Arab Emirates) has revealed its strategy for introducing the UAE CBDC. The CBUAE will likely launch its digital currency by mid-2024.

On March 23, the CBUAE released an [official statement](https://www.centralbank.ae/media/lpoilyue/cbuae-launches-the-central-bank-digital-currency-strategy-the-digital-dirham-en.pdf) regarding its strategy for the digital Dirham. The statement mentioned that the CBUAE has signed an arrangement with the [R3](https://r3.com/) and [G42 Cloud](https://www.g42cloud.com/) firms to launch its CBDC. 

## UAE CBDC: The three pillars of the first phase

The announcement further stated that the first stage for implementing the digital Dirham would likely be concluded in the next 12 to 15 months. The central bank has set three main pillars or goals for the first stage.

Firstly, the CBUAE is aiming for the soft launch of its pilot project, mBridge. It is a cross-border payment with several central banks and authorities. They include the Bank for International Settlements (BIS), the Bank of Thailand, the Hong Kong Monetary Authority, and the Digital Currency Institute of the People's Bank of China. 

The second goal of the CBDC's first stage is to collaborate with India for virtual currency bridges. India is among the UAE's top trading allies. The two countries will work on a bilateral virtual coin bridge to facilitate trade. Meanwhile, India itself is implementing its [digital Rupee](/news/article/reserve-bank-of-india-cbdc).

Lastly, the Proof of Concept work will also be implemented for the domestic Dirham. It is to facilitate the wholesale and retail uses of the currency.

## Financial infrastructure transformation

Introducing a digitized version of the Dirham is a key step toward financial infrastructure transformation in the country. The FIT program in the UAE is looking to catch up on the global trend of introducing CBDCs.

Many countries, including India, [Russia](/news/article/putins-blockchain-payment-system), [Iran](/news/article/iran-accepting-crypto-payments), the UK, and others, are working on their virtual fiat currencies. Therefore, the digital currency of the UAE can be a significant step toward a transformation in the country's financial system.


Yellow image of UAE flag in front of Dubai skyline

UAE CBDC to Complete First Phase by 2024 

[Nigeria CBDC](https://cointelegraph.com/news/nigeria-cbdc-adoption-spikes-as-fiat-currency-shortage-grip-the-nation) adoption has been soaring over the past months due to millions of residents turning away from using the country's fiat currency in favour of the eNaira, multiple news outlets have reported.

The Central Bank of Nigeria has printed larger denominations of its currency to replace older banknotes as it fights rising inflation.

While this has been one of the many ways several developing economies, including West African counterparts like Ghana, have tried to reduce inflation and tackle rising economic challenges, most Nigerians feel that the current financial crisis provides the perfect opportunity for them to experiment with the country's central bank digital currency ([CBDC](/news/article/uk-sought-cbdc-head)). 

## Nigeria CBDC wallets usage has increased by 12-fold 

Wallets created for using the eNaira have increased 12-fold in the past five months, according to Godwin Emefiele, the Central Bank of Nigeria's governor.

The number of [CDBC](/news/article/russia-develop-cbdc-settlement) wallets currently stands at 13 million, up from around 1 million in October 2022.

According to a Bloomberg report, the eNaira transactions valuation has spiked by 63% to approximately 22 billion Naira (about [$47.7 million](https://www.bnnbloomberg.ca/nigeria-digital-currency-transactions-jump-63-on-cash-shortages-1.1898692)) since its introduction in October 2021. 

## More than 10 billion eNaira minted

According to Emefiele, the [CBDC](/news/article/central-bank-of-kazakhstan) has become the payment channel of choice for the execution of social interventions as well as financial inclusion. 

This is why the country's demonetization programme led to the minting of more than 10 billion eNaira while the circulating cash supply was reduced by 68.75% from 3.2 trillion nairas to 1 trillion nairas. 

## CBDCs continue to trend across the globe     
                      
As of 22 March, Nigeria joins China and the Bahamas as countries with real-world use cases of national digital currencies.

Other [sub-Saharan](https://www.imf.org/en/Blogs/Articles/2022/06/23/blog-africa-cbdc) countries like Ghana and South Africa are piloting an electronic version of their countries' fiat currencies, while Zambia, Namibia, Zimbabwe, Madagascar, Tanzania, Rwanda, Kenya, and Uganda are keenly embarking on research programmes.


Nigerian CBDC Naira in wallet in front of image of Nigeria

Nigeria CBDC Adoption Soars Amid Cash Shortage 

## HM Treasury seeks to hire new UK CBDC head 

The UK Treasury is seeking to fill the position of "head of a central bank digital currency" (CBDC) to spearhead the government's efforts to create a digital pound.

The United Kingdom has been mulling introducing the UK CBDC, and there are plans to launch a public consultation soon.

According to a [LinkedIn job posting](https://www.linkedin.com/jobs/view/head-of-central-bank-digital-currency-at-hm-treasury-3452118143/?originalSubdomain=uk), the successful candidate will, in collaboration with the CBDC task force and the Bank of England, lead the exploration and development of the country’s central bank digital currency. The role of the UK CBDC chief, which is separate from the crypto-assets and digital currencies head, is in tandem with the existing Payments and Fintech Team.

## Ensure they get the UK CBDC design right

Reports indicate that from as early as 2020, the Bank of England was [already chasing the CBDC](/news/article/cbdc-uk) use-case dream in collaboration with other central banks worldwide. Britain's Financial Services Minister Andrew Griffith stated on January 10, 2023, that the country’s [immediate priority](https://www.reuters.com/world/uk/britain-push-ahead-with-readying-ground-digital-pound-2023-01-10/) was to ensure they get the UK CBDC design right. Saying the planned public consultation would be addressing the question of if and not when Griffith said he "would rather be right than be first".

A CBDC is a digital currency, but unlike cryptocurrencies, it’s issued by a central bank. There won’t be any physical money, such as coins or notes, produced, meaning the UK CDBC would only exist in electronic form. According to a report dubbed "[Future of Payments](https://www.omfif.org/about/)" by OMFIF (the Official Monetary and Financial Institutions Forum, an independent think tank focusing on public investment, economic policy, and central banking, at least 100 countries globally are at a particular stage of exploring or developing CBDCs.

## The clearest indicator

The report further stated that at least two-thirds of the central banks surveyed by OMFIF had plans to issue CBDCs within the next ten years. [Statistics in the public domain](https://www.atlanticcouncil.org/cbdctracker/) indicate that all of the G-7 economies and at least 18 others from the G-20 are [working on their CBDCs](/news/article/bank-of-spain-cbdc-project). China leads the larger economies as its digital Yuan is on a trial run. 

The UK's Financial Services Minister assured MPs late last year that there would be a lengthy consultation before the introduction of a CBDC.

The Bank of England maintains there [wasn’t a substantive decision yet](/news/article/cbdc-bank-of-england) on its introduction. However, Deputy Governor Jon Cunliffe suggested that the [FTX fiasco](/news/article/ftx-exchange-under-investigation) and its impact on the crypto sphere was the clearest indicator of the need for a digital pound.


yellow image of big ben and uk flag with digital pound in centre

UK CBDC Head Sought by HM Treasury

This next quarter, the central bank in Russia will start looking into two different potential cross-border CBDC settlement models.

There are continuous sanctions against Russia due to its invasion of Ukraine. Yet, reports indicate that Russia's central bank is about to begin building a cross-border settlement system using a central bank digital currency (CBDC).

[According to a report published on 9 January by media outlet Kommersant](https://cointelegraph.com/news/russia-to-begin-work-on-cbdc-settlement-system-in-q1-as-sanctions-endure-report), the digital rubble plans are expected to progress in the first quarter of 2023. Russia's central bank will study two possible cross-border settlement models before moving forward.

## CBDC Russia future: Bilateral agreements or hub-based platforms

In the proposed plan’s first version, different countries will integrate their CBDC systems by entering into separate bilateral agreements with Russia. 

Each agreement would be crafted to ensure that asset conversion and transfer between the nations would be compliant with the rules outlined in the other agreements.

The second, more complicated approach suggests establishing a single hub-like platform on which Russia and other countries can engage, sharing common protocols and standards to make it easier for connected countries to make payments to one another.

Roman Prokhorov, the Financial Innovations Association (AFI) board of directors' head, expressed his opinion that the first model was less promising for bilateral interactions between countries, but was easier to implement.

While the first model was simpler to implement, the second was more complex. The other choice was deemed more "advanced," and its proponent evaluated the possibility of implementing an initial two-way system.

He viewed China as the most likely partner in this scenario due to the country's "technical and political readiness". [According to reports from September,](/news/article/russia-approves-cross-border-crypto) Russia's plans to use digital currency for settlements with China may only occur sometime in 2023. Others, however, believe that technological limitations rather than political ones will support the CBDC Russia proposes.

## CBDC Russia will not improve political situation - claim

Alexey Volkov, the vice president of the Association of Banks of Russia, stated that the introduction of a digital ruble will not change or improve the global political situation of the country and that trials for the Russia CBDC platform can only be undertaken with countries that are friendly with the Russian government and are technologically ready.


Russia to Develop CBDC Settlement System

The Central Bank of Kazakhstan has recommended rolling out its in-house CBDC in 2023. The expansion will be done in phases with the goal of introducing it into commercial operations by the end of 2025.

Kazakhstan, the world’s third-biggest [Bitcoin mining](/news/article/how-to-mine-bitcoin-cash) hub, is now all set to launch its Central Bank Digital Currency, or CBDC, which is a digital tenge. The central bank revealed plans for the launch after the second testing phase was completed.

## Central Bank reveals initial studies on the CBDC

Changpeng “CZ” Zhao, CEO of [Binance](/news/article/guide-to-binance-uk), also revealed that Kazakhstan's CBDC will be integrated with BNB Chain, [the blockchain](/news/article/what-is-blockchain) built by the crypto exchange. Kazakhstan's primary motive for conducting studies and launching its CBDC is to improve financial inclusion in the country, promote competition, encourage innovation in the payment industry, and increase the nation's overall global competitiveness.

The initial studies conducted by Kazakhstan's central bank focused mainly on programmability and offline payment methods. It was then recommended that market participants and infrastructure players be included in different scenarios and clarified language be used by the country's regulators. The latest [research paper](https://nationalbank.kz/file/download/85770) on the matter reveals that the CBDC is recommended to roll out in phases due to the potential for infrastructure preparation, technological improvements, the development of an operating model, and a regulatory framework.

As Russian citizens continue to pour into neighbouring countries due to the war, Kazakhstan has announced its plans to legalise mechanisms for converting crypto into cash.

During the international forum Digital Bridge 2022, Kassym-Jomart Tokayev, President, stated that the country is ready to go further with the crypto-to-cash mechanism and even give it full legal recognition, given that the financial instrument continues to show its relevancy and security.

In addition, the neighbouring country, Georgia, also has plans to introduce new crypto regulations to become a global crypto hub.


yellow image of kazakhstan with central bank of kazakhstan logo in foreground

Central Bank of Kazakhstan CBDC Rollout

The Bank of Spain aims to launch a wholesale central bank [digital currency](/news/article/which-uk-banks-allow-cryptocurrency-purchases) programme and has requested bids from financial institutions and technology suppliers by 31 January.

The selected proposals must be completed in at least nine months, beginning on 3 April, with a completion date of 29 December, 2023. According to the selection process paper, they can offer an extension depending on many circumstances.

## CBDC programme aim, according to the Bank of Spain

According to an [official statement](https://www.bde.es/f/webbde/GAP/Secciones/SalaPrensa/NotasInformativas/Briefing_notes/es/notabe051222.pdf) from the financial institution, the initiative aims to imitate the usage of a CBDC in wholesale transactions. In wholesale transactions, monies transfer between banks and financial institutions. 

The bank claims the [wholesale CBDC](/news/article/reserve-bank-of-india-cbdc) initiative is unrelated to the European Union's study on a retail digital euro. Separately, Banque de France announced two studies in September to evaluate the feasibility of a wholesale CBDC.
 
According to a translated 5 December announcement, it would use the programme to experiment with financial asset liquidation, simulate money movement, and assess the merits and downsides of incorporating a wholesale CBDC into its present procedures and infrastructure.

While a retail [CBDC](https://finance.yahoo.com/news/spain-central-bank-opens-call-174249256.html?guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAJJPnYxvXtv0yecmihYLiCclqtZ_YZnB-kJYsxLfIQm1jiSb5dIREbPFcJxBwVc4aS-0gMBYy0dbGQsBohlMMORhi92GPbxcavqroNpkM-nn9OlnzxFMqpZi2y-W8lRLendbL9TJ7k2yDHAxEj4cMLZ_qUF8mljP4vJWpI7zU4C2) is available to the general public, a wholesale CBDC is a digital currency primarily used by financial institutions to keep reserves with a central bank.

The programme is unique to the BDE and is unrelated to work being done in the European Union to investigate the usage of a [digital euro](https://www.ecb.europa.eu/paym/digital_euro/html/index.en.html).

## Reason for undertaking study

In justifying the initiative, the BDE stated that studying CBDCs can assist in assessing how much they can contribute to adapting to the requirements and expectations of an increasingly digital society. 

CBDCs are also being "analysed and experimented" within various jurisdictions, with the primary focus being retail use. However, it claimed that more corporations are venturing into those of a wholesale or interbank kind".


Bank of Spain Proposes CBDC Project

Reserve Bank of India will launch the retail central bank-backed digital currency ([CBDC](/news/article/india-cbdc-launch) pilot next month. It will be interoperable with existing payment systems.

On [1 November](https://www.reuters.com/article/india-cenbank-digital-rupee-idUSKBN2RQ0WO), RBI debuted the wholesale segment pilot for the digital rupee. According to the RBI, the digital rupee will increase market efficiency by lowering settlement transaction costs.

The settlement of secondary market transactions involving government securities has been the primary use case of the Reserve Bank of India CBDC.

## Reserve Bank of India CBDC to debut

[According](https://economictimes.indiatimes.com/news/economy/policy/rbi-in-final-stages-of-retail-cbdc-pilot-rollout/articleshow/95598347.cms?from=mdr) to the Economic Times of India, the RBI is reportedly finalising plans to launch the retail digital rupee pilot. The participating [banks](/news/article/which-uk-banks-allow-cryptocurrency-purchases) are the State Bank of India, HDFC, Union Bank of India, Bank of Baroda, ICICI, Kotak Mahindra, Yes, and IDFC First Bank.

The report stated that the pilot would include all commercial banks currently operating in the country and that the National Payments Corporation of India would host the [CBDC](/news/article/cbdc-uk) platform. It will be similar to the instant real-time payment system formed by NPCI, the unified payments interface (UPI) system.

According to the report, the digital rupee is not intended to replace existing widely used payment systems, but to supplement them. The retail CBCD will be compatible with other payment systems and function similarly to UPI.

Each participating bank will test the CBDC on 10,000 to 50,000 users. The banks will work with the PayNearby and Bankit platforms to implement the new payment option, and the NPCI will be in charge of the CBDC infrastructure.

Customers and merchants will both need to download the CBDC-specific wallets. The retail CBDC of India will initially be offered as a stand-alone product, with the final version integrating with existing mobile and internet banking services.

Plans to launch the CBDC were revealed in February 2022 by Indian Finance Minister Nirmala Sitharaman, who claimed that a digital rupee would give India's economy a "big boost". The Reserve Bank of India then suggested a three-step graded rollout strategy, aiming for little or no disruption to the traditional economic system


Reserve Bank of India CBDC Pilot

Rishi Sunak is a crypto advocate who has taken several initiatives to promote digital assets in the country.

When Sunak assumed the [position of United Kingdom](https://www.cbsnews.com/news/rishi-sunak-appointed-prime-minister-of-the-united-kingdom/) Prime Minister, he had become the wealthiest, youngest, and the first British Asian PM in the country's history. Sunak's rivals withdrew themselves from the race for Conservative Party leadership. This left him as the only candidate for the post. It is the third change in UK's premiership in the last two months.

Nonetheless, the blockchain industry and cryptocurrency investors are hailing the new PM because they see the Rishi Sunak crypto stance being positive.
Interestingly, he has replaced [Liz Truss](/news/article/liz-truss-prime-minister), who was pro-crypto. She had to resign after 44 days of her premiership. Unprecedented economic turmoil in the UK and the criticism from the masses forced her to step down.

## What's the Rishi Sunak crypto stance?

Truss was his predecessor and rival in the previous Conservative party elections. She was also a FinTech and digital asset supporter who backed the movement for welcoming cryptocurrencies. She also shared anti-regulatory views.

Unlike Truss, Sunak supports a regulated market. Also, he is ambitious to transform Great Britain into a global hub for cryptocurrencies and FinTech.
The newly appointed PM previously served as Finance Minister under then PM Boris Johnson. He assumed the office in 2019 and is known for his role in crisis management during COVID-19. He also took various formidable initiatives during this period to promote cryptocurrencies.  

## Initiatives for promoting blockchain and cryptocurrency

A significant step has been the advancement of fiat currency-pegged digital tokens, known as stablecoins. The Rishi Sunak crypto stance advocated using stablecoins as a legit means of payment in the country. 

Moreover, he also developed an FMI Sandbox (regulatory sandbox for financial market infrastructures). It aimed to bring forth innovation in the FinTech industry and was expected to be operational by next year.

He also expressed interest in launching the Bank of England's central bank digital currency (CBDC). He stated that a CBDC could act as a new means of payment. The swift introduction of a [CBDC in England](/news/article/cbdc-bank-of-england) seems quite unlikely. But a crypto believer's government might boost the chances.  

## Rishi Sunak's resolve to make the UK a global crypto hub

Apart from that, what defines Rishi Sunak as a crypto enthusiast is his resolve to transform the UK into a [global cryptoasset technology hub](/news/article/cryptocurrency-investment-uk). While sharing his views on regulatory reforms and the introduction of stablecoins, he stated it was his ambition to turn the country into a "global hub for cryptoasset technology".

It was a clear statement that could define the future of blockchain technology and digital assets. As per this stance, we might see regulatory changes in Britain’s policies promoting cryptocurrencies. Also, investors might expect the introduction of digital tokens as a recognised means of transaction.

However, the youngest PM of the UK in the modern era has stepped in during a period when the UK is facing economic headwinds. Amid this scenario, the tall claims might fall flat.



Rishi Sunak, crypto believer, becomes UK PM

[Santander](https://www.santanderbank.com/) is one of the largest networks of banks in the world, with its headquarters in Spain. In August, it announced that it would be launching the [Santander cryptocurrency trading](/news/article/santander-crypto) feature in Brazil. Now, the firm has proposed using the Brazilian CBDC (central bank digital currency), Digital Real, to tokenise assets. 

The firm intends to facilitate trading real estate properties and cars for crypto users in Brazil. For this reason, it will be working with the [FinTech ParFin](https://parfin.io/en/), which can assist in tokenising ownership rights and controlling the exchange of assets or currencies. 

## Santander cryptocurrency trading project for LIFT Challenge

The proposal for the tokenisation of real estate properties and vehicles through CBDCs is for the LIFT Challenge program. The Central Bank of Brazil initiated the program to promote the use of CBDC, Digital Real, in the country. The coin could be launched in 2024.

Along with Santander, several other institutions became part of it, including the [Mercado Bitcoin Exchange](https://www.mercadobitcoin.com.br/), [Itau Unibanco](https://www.itau.com/), and Visa do Brazil. Because of this initiative from the central bank, various use cases of the upcoming digital currency came forward.   

## Digitising real-world assets

The banking institution is looking to build an infrastructure that can digitise real-world assets. It will provide a complete platform to the users where they can easily buy or sell properties, vehicles, or other assets via virtual currency. 

According to a local news agency, the bank's Executive Superintendent of Open Finance, Jayme Chataque, [said](https://livecoins.com.br/santander-projeto-real-digital-ompras-de-carros-e-casas/) that the tokenisation would allow the users to leverage [smart contract](/news/article/smart-contracts-blockchain) and blockchain technology for making deals for their houses, cars, or other assets. 

Meanwhile, the CTO of ParFin, Alex Buelau, stated that the firm has built a permissioned blockchain, ParChain, which will be used for digitisation for this project. Also, he mentioned that the blockchain could provide enhanced security through Multi-Party Computation technology.



Santander Cryptocurrency Services Expand

The Reserve Bank of India is about to launch India CBDC, or Central Bank Digital Currency, aimed at specific use cases.

According to the Reserve Bank of India (RBI), "multiple technological options will be tested, and the final architecture will be decided based on the results." The Indian Central Bank recently published a report titled "[Concept Note on Central Bank Digital Currency](https://rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=1218)."

The RBI clarified that the concept note's goal is to raise awareness about CBDC and the characteristics of the digital rupee. It explains the objectives, options, benefits, and risks of CBDC in India.

It discusses technology and design choices, potential uses of the digital rupee, issuance mechanisms, and the effects of CBDC implementation on the banking system, monetary policy, financial stability, and privacy concerns.

## India CBDC

[CBDC](/news/article/cbdc-uk) will be a payment medium, legal tender, and safe store of value for all citizens, businesses, governments, and others who can convert cash into digital rupees. It aims to speed up transactions while lowering costs.

It will be consistent with RBI monetary policy and appear on the central bank's balance sheet as a liability. It is a fungible legal tender that does not require holders to have a bank account.

Digital currency will be introduced gradually, with appropriate phase-out strategies. This means that the launch will proceed through various stages of pilots, followed by a final launch.

In addition, there will be concurrent use cases that can be implemented with little to no disruption.

## RBI on CBDC

The Reserve Bank of India has also been analysing the idea of "implementing account-based CBDC in the wholesale segment and token-based in the retail segment via a graded approach." 

The RBI has also expressed concern about the recent rise in the popularity of cryptocurrency. It is concerned that the proliferation of crypto assets will pose significant risks in terms of money laundering and terrorism financing.

"The unabated use of crypto assets may pose a threat to monetary policy objectives because it may result in the creation of a parallel economy and will likely undermine monetary policy transmission and domestic currency stability," it said.

The RBI stated that developing the CBDC could provide the public with a risk-free digital currency that will provide them with lawful benefits without the risks associated with dealing in private virtual currencies. 






RBI to launch India CBDC

The Yuan Coin, also known as e-CNY, e-RMB or e-yuan, is China's digital currency. It aims to replace some of the physical cash in circulation.

The coin, issued by the People's Bank of China (PBOC), is a digitised version of the Chinese physical Yuan (Renminbi). It works the same as banknotes and coins but in a digitised form. 

## The yuan coin history

China has been working on the e-yuan since 2014. In October 2020, the virtual coin underwent its first and biggest real-world test. The local government of [Shenzen](https://www.cnbc.com/2020/10/12/china-digital-currency-trial-over-1-million-handed-out-in-lottery.html) handed out 10 million e-RMB (about $1.5 million) to its citizens in a lottery.

In December 2020, the [Suzhou](https://www.cnbc.com/2020/12/07/china-hands-out-digital-yuan-in-trial-as-jdcom-accepts-the-currency.html) local government again handed 20 million e-RMB ($3 million) to its residents in a lottery. 

A few features not activated in the Shenzen trial were tested in the Suzhou trial run. One notable feature is the e-CNY offline feature, allowing users to touch smart devices to make transfers.

The Suzhou public test also saw JD.com (one of the biggest Chinese e-commerce firms) become the first online platform to accept this virtual currency.

In Feb 2021, the Chinese capital city [Beijing](https://www.cnbc.com/2021/02/08/china-to-hand-out-1point5-million-in-lunar-new-year-digital-currency-test.html) handed out 10 million e-RMB (about $1.5 million) to its residents, making it the third largest public test for the digital currency. The same month [Chengdu](https://www.cnbc.com/2021/02/24/chinese-city-chengdu-launches-6-million-digital-currency-test.html), another city in China, announced the issuance of close to $6 million worth of e-RMB to its citizens.

## The yuan coin so far in 2022

As of 2022, a lot has happened to the benefit of e-RMB. The [digital Yuan app](https://www.china-briefing.com/news/china-launches-digital-yuan-app-what-you-need-to-know/), previously only available to a few people, can now be downloaded from the Chinese app stores. It is compatible with both iOS and Android devices.

The app, however, can only be used by residents in 23 cities where China continues to test this virtual currency. Residents in the cities, which include Shanghai, Beijing, and Shenzen, can use the app to pay for goods and services with e-CNY. 

By mid-January, the app had over 261 million users and had made 87.5 billion e-CNY ($13.78 billion) worth of transactions. The app quickly became one of the most downloaded apps available in China.

Shortly after the app launched, WeChat, a messaging and payment platform with over 1.2 billion users, announced it would begin to allow users to select e-CNY as a payment option. Alibaba also announced the integration of this virtual currency into their payment options.

The e-CNY is no longer just a payment option for consumer goods. One can also use it for wealth management products and bank loans. There are plans to extend the use of this virtual currency to medical treatment, education, and other finance offerings.

Holders of e-CNY have also benefited from cards with small LCD screens that tell them how much funds are in their Yuan accounts. Users can access these updated local Chinese government cards without the internet.

The popularity and wide acceptance of the e-CNY have seen China set its eyes on the international market. The country is working towards the internalisation of its virtual currency.

## Bottom line

While the e-yuan is still in its early stages, it has quickly proven there is demand and room for it. The digital coin is not a cryptocurrency per see but a [central bank digital currency (CBDC)](/news/article/cbdc-uk), considering it is issued and controlled by the People's Bank of China (PBOC). CBDCs are built on the same rails as cryptocurrency's underlying technology, blockchain. Some see CBDCs as a threat to privacy and defeat the purpose of decentralisation, while others believe its adoption does benefit the crypto market. What do you think?
 



What is the yuan coin?

CBDCs have been a hot topic for the last few years, but are they ready to disrupt the UK financial system? While the answer will vary greatly, many believe that CBDCs have the potential to replace high street bank deposits in the long run.

This article discusses the potential benefits of CBDCs as a means of payment and the security concerns it raises. This article also explores the risks associated with CBDCs, including their potential to replace traditional bank deposits.

## Blockchain technology

The [Bank of England](https://www.bankofengland.co.uk/news/2021/april/bank-of-england-statement-on-central-bank-digital-currency) recently released a discussion paper that explains how the proposed CBDC will work. A digital wallet would be available on mobile devices and be accessible for checking balances and receiving government-issued funds.

CBDC transactions would be free of fees and allow citizens to send and receive payments instantly. CBDC would function much like traditional bank accounts, but with a few important differences. With blockchain technology, transactions are almost instantaneous, so citizens would not need to worry about bank accounts or credit cards to use CBDC.

The UK Central bank has [expressed interest in using blockchain technology](/news/article/cbdc-bank-of-england) to create a digital pound, a cryptocurrency that would replace banknotes in the UK. This project could also replace the declining use of banknotes in the UK, which are rapidly being replaced by mobile and online payments. The Bank of England's Discussion Paper on CBDCs and stablecoins has been released several times, and the latest draft of the document suggests further innovation in payment infrastructure.

The key benefits of using a Blockchain-based CBDC include low-cost, fast, and safe payments. CBDC should support domestic and cross-border transactions, allowing for low-cost payments in the UK and abroad. It should also enable dual offline transactions and instant payments. Ultimately, the project's benefits must be clear and measurable. It is also important to remember that the project must be scaleable and cost-effective.

There are still several issues to be considered when developing a CBDC based on blockchain. The biggest challenge is scalability, which is one of the primary concerns of blockchain. Although there are many solutions, there is no "perfect" solution. A CBDC with good scalability will benefit the entire economy and the UK banking industry. With this, the currency can be widely accessible and inclusive. It can help the financial sector to compete in the global economy.

The central bank's digital currency could disrupt the banking system in the UK. While the level of disruption depends on how well CBDC works, it could also replace traditional intermediaries such as bank deposits and high street bank accounts.

However, there are no guarantees that the project will work as intended. It will still require government approval and further development before making a final decision. And for the time being, there is no clear answer. A formal consultation will start in 2022 and form the "research and exploration" phase that will lead to plans and regulations over the coming years.

## Regulatory issues

The regulatory issue with using CBDCs in the UK is a thorny one. While it's still an unproven technology, central European banks have already expressed an interest in using this digital asset. They have discussed its benefits, challenges, and legal requirements. Most recently, the Bank of England and the U.K.

Treasury announced they would conduct a joint consultation on CBDCs by the decade's end. While there may be some advantages to CBDC use, the report noted significant privacy and financial stability challenges.

The ECB has also been fairly public in its support of CBDC use. The ECB has advocated for using a digital euro in Europe and argued that it would underpin innovation, deliver strategic autonomy, and ensure the security of payment systems across the EU. Fabio Panetta, a member of the ECB's executive board, argued in favor of CBDC use and drew an analogy between cash and the rise of the internet.

The UK Central Bank's proposed CBDC is a unique solution to the challenges of a digital payment system. It would preserve the coexistence of private and sovereign money, increase efficiency and security in payment markets, and enhance confidentiality.

In addition, this digital asset could potentially be a gateway from big tech companies, which are increasingly offering financial services. The rapidly developing artificial intelligence sector has compounded privacy issues. Moreover, regulation is still too slow to keep pace with technological advancement.

Despite its structural similarities to traditional currencies, CBDCs have generally been considered safe cryptos. China's digital Yuan, which will be used in the 2022-Winter Olympics, is currently the most developed.

However, early adopters of CBDCs often adopt strict stances and even ban decentralized crypto currencies. This is especially true in the UK, where the UK FCA has updated its prohibition on the marketing, distribution, and sale of crypto-asset exchange-traded notes to retail investors.

## Security concerns

The UK Central bank has recently announced plans to launch a digital currency, dubbed CBDC, in the UK. The digital currency has a wide variety of implementation and design options, but one of the most pressing concerns is security.

If security is not a top priority, the CBDC program, the central bank's reputation, and the wider opinion of the new currency could suffer. Therefore, the CBDC program must consider various potential threats, including cybersecurity.

While it is true that privacy is essential to cryptocurrency, it is also important to understand the risks of using the system. Many people want privacy, while authorities may want to ensure their money does not fall into the wrong hands.

In general, however, most currency variants will only provide one or the other of these requirements. For instance, a database containing account balances and a ledger containing plaintext transactions are easy to regulate and offer little privacy.

A significant challenge to CBDC is that it could become a gold mine for hackers. Even if there's a limited market for CBDC, sophisticated hackers and nation-states could steal it. Moreover, inside employees, it could be misused or infiltrated, resulting in small-scale identity theft. Another concern involves the use of "gray" charges via opaque fees. There are already many risks in the current system, but CBDC might alleviate some of them.

In addition to the concerns mentioned above, there are other problems related to this digital currency. Several third-party threat actors can undermine CBDC, including scammers, application developers, and hardware manufacturers.

These third-party actors are more powerful than typical end users and can attack it at different layers. These malicious applications or hardware wallets can be backdoored, leading to unauthorized spending of funds.

Whether CBDC will be safe or vulnerable is a question for policymakers. The system is vulnerable to hacking, data theft, and account breaches. As with any new technology, the UK Central bank digital currency should invest in a robust cybersecurity strategy. This should begin with considering how to secure the data and privacy of users. The World Economic Forum has recently published a white paper on CBDC technology considerations.

## Potential to replace bank deposits

The Bank of England and HM Treasury are considering creating a central-bank digital currency (CBDC). Such a currency would replace cash and bank deposits but would be issued by the central bank. While CBDCs may replace cash, they may not satisfy the need for a hard copy. The Bank of England believes CBDCs would have a place alongside cash in everyday life.

One way CBDCs could replace bank deposits is by allowing non-bank financial intermediaries to build programs that sweep the digital currency into higher-yielding liabilities. These liabilities are most likely money market accounts.

A customer would buy money market shares in exchange for CBDC. Then the customer would purchase these money market shares with the CBDC and transfer them to a money market fund. The money market fund would use the CBDC to purchase assets with a higher yield, and the maturity transformation would transfer from the banking system to the shadow banking system.

The Bank of England does not provide accounts directly to the public. If this were to change, the CBDC would be accessible to the public directly. This would entail seismic changes in the banking system. However, the U.K. Treasury envisions a CBDC as a parallel offering to current cash and bank deposits. Whether the UK moves to the development stage depends on the consultation outcome.

A central bank's digital currency could have numerous benefits, but it may pose several risks, including privacy and financial stability. It would act as electronic money that could be used for everyday payments, just like cash. While it isn't a final decision, the central bank and the government are considering the issue.

CBDCs may be a necessary step in the digital currency world, but a decision has not yet been made. However, discussing its implementation is an important step toward a unified monetary system.

Several countries are experimenting with CBDCs. Some are researching, testing, and distributing them to the public. In the Bahamas, the Sand Dollar is one local CBDC. It has been in circulation for more than a year.

Sweden's Riksbank is currently working on a proof-of-concept and exploring potential policy implications. In China, the digital renminbi (eCNY) currency is making progress, with more than 100 million users and billions of Yuan transacting.


CBDCs and the UK Central Bank Digital Currency

Central bank digital currencies (CBDCs) are gaining wider acceptance by the day. While only 9 countries have launched crypto CBDCs, 14 are in the pilot stage, 16 are developing technology and 40 are conducting research – in all, 87 countries are exploring CBDC technology – the race for the future of money is well and truly on. 

France is the latest country to join the discussion, as it completed the first stage of CBDC experimentation on Thursday (16th December). That said, what exactly is a CBDC?

## What is a CBDC?

A CBDC is essentially a digital form of fiat currency issued by a central bank. It can be in the form of a retail currency or a wholesale currency. A retail CBDC is intended for public use while a wholesale CBDC is meant to serve as a medium of exchange between financial institutions. 

Both forms of technology are backed by the full credit of a government. CBDCs will make purchasing goods, sending local and cross-border payments and layering possibilities on transactions much easier, among other possibilities. 

While private cryptocurrencies offer these capabilities in several shapes and forms, they are decentralised, not centralised and controlled by a government. 

## France's CBDC quest

On Thursday, The Banque de France completed the first stage of wholesale CBDC experimentation. The next step is exploring cross-border transactions. Interestingly, France has been exploring wholesale CBDC technology since March 2020. 

France conducted experiments with numerous partners, including HSBC, the final stage of which was issuing a digital bond on a blockchain with settlement in wholesale CBDC. The Banque de France is exploring a retail CBDC as well. 

## Conclusion

As private crypto assets are gaining prevalence and people are avoiding the use of cash (apps like Google Pay and [Cash App](https://cash.app/) are being increasingly used), governments all over the world are looking at CBDC technology to combine the power of crypto with the craze of digital currency.

More [Business news](/news/category/crypto-business-news).


France Jumps on Crypto CBDC Bandwagon

Existing payment platforms and financial infrastructure charge extravagant fees to process cross-border crypto transactions.

The exchange rate of a currency comes into play as well when you transfer funds to your local bank account. Plus, the rate at which the conversion (from let's say US Dollar to Euro) takes place is lesser than the market rate – of course, an appropriate margin prevents the possibility of a payment platform incurring a loss while the transfer ID is taking place.

To add to that, you have to wait for a few working days (one to two working days if you're lucky) for the funds to reflect on your account.

Cue cryptocurrencies - cryptocurrencies are bound to make cross-border transactions quicker, securer, cheaper and more transparent.

Following our report on recent research which indicated that cryptocurrency is becoming the top choice for cross-border trade, we look at the subject in more detail.

## Crypto Will Shape the Future

Central Bank Digital Currency (CBDC) technology and cryptocurrencies like [Ripple](/coins/xrp) are bound to make cross-border transactions easier. [El Salvador adopted Bitcoin (BTC) as a legal tender](https://www.investopedia.com/el-salvador-accepts-bitcoin-as-legal-tender-5200470) for many reasons, of which one was to ease the process of transferring money overseas.

While Bitcoin is not the global standard for overseas payments, CBDCs must be looked at with intent.

CBDCs will make it easy to transfer money abroad and will offer much-needed transparency and traceability – officials will be able to track transactions and pinpoint suspect cases of financial fraud and money laundering. They are a fantastic solution for the unbanked and offer the possibility of layered transactions.

For example, you could make a cross-border payment to your parents and program the payment to execute on their anniversary. While it will take time to transform legacy solutions into modern, crypto-based infrastructure, the future of the crypto industry in global finance is bright. We will see a substantial shift in the due course of this decade.

Crypto Q&A: The Future of Cross-Border Transactions

A senior UK Government member has admitted a retail central bank digital currency (CBDC) for the country may not arrive until the second half of this decade.

While confirming it will take ‘several years’, John Glen, Economic Secretary to the Treasury, also sounded a note of caution about whether a UK CBDC will even go ahead.

The UK is actively exploring the potential for a retail central bank digital currency to complement to cash and bank deposits.

If it proceeds, it would be a new form of digital money, denominated in Sterling and issued by the [Bank of England](/news/article/bank-of-england-crypto), for everyday payment use.

## Delivering UK CBDC Would Require Lots of Work

In early 2021, the UK Chancellor of the Exchequer created a taskforce to explore a retail central bank digital currency and moves to engage stakeholders including consumer groups, businesses and tech experts. The intention is to ensure UK authorities approach consideration of a CBDC in a coordinated way.

So far, no decision has been taken, and more consultation is due to start next year.

Delivering an update on the project, Mr Glen said: ‘Exploring and delivering a UK CBDC, if there were a decision to proceed, would require carefully sequenced phases of work, which will span several years.

‘HM Treasury and the Bank of England will publish a consultation in 2022 setting out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model.

‘If there is a decision to proceed following the consultation, a development phase would include the publication, by the Bank of England, of a technical specification to explain the proposed conceptual architecture for a UK CBDC. This development phase could involve in-depth testing of the optimal design for, and feasibility of, a UK CBDC.’

## Liaising with International Partners

This could then lead to a build and testing phase, but Mr Glen warned : ‘Given the scale and national importance of such a project, this phase would likely take several years and could involve the development of large-scale prototypes and live pilots.

‘Were the results of each of these phases to conclude that the case for CBDC were made, and that it were operationally and technologically robust, then the earliest date for launch of a UK CBDC would be in the second half of the decade.’

The UK Government will also liaise with international partners on the global implications of any such move.

Bank of England CBDC Would Take ‘Several Years’

The findings of a major study of digital currencies by several central banks have been published.

The Bank of International Settlement (BIS) and seven central banks have conducted work on retail central bank digital currencies (CBDCs) and analysing policy options and practical implementation issues.

## Digital Currencies Report

Three reports have been published exploring how CBDCs could best meet users' future needs through developing interoperable systems that support private innovation while preserving public trust.

A statement from BIS said extensive cooperation and dialogue will be required to develop and run a CBDC, preserving the centrality of central bank money for future systems that anchor public trust and support public welfare

It adds: ‘For central bank digital currencies (CBDC) to work effectively, public and private institutions need to cooperate to ensure integration with existing payments systems; to anticipate customers' future needs; and to support innovation while preserving public trust, privacy and stability in the broader financial system.’

## Initial Research

A group comprising Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Sveriges Riksbank, Swiss National Bank and BIS, has built on initial research into CBDC foundational principles from 2020.

Although a retail CBDC is yet to be issued by any of these banks, this ongoing research is seen as a positive step for the wider adoption of cryptocurrency.

The BIS statement continues: ‘Delivering on the future needs of consumers would require systems that encourage innovation, choice and competition among a diverse mix of intermediaries.’

## Detailed Study

The first report looks into how CBDC systems can be designed with private-public collaboration and interoperability to achieve that objective. The report acknowledges that running a CBDC system would be a major undertaking for a central bank, especially ensuring policies were in place to protect privacy and govern access to payment data.

The second report explores how, in a fast-changing tech landscape, a CBDC could serve individuals and organisations best. Learning from the lessons of previous payment innovations, the report recognises that utilising existing networks is often required.

Outlined in the third report are the potential implications of CBDC on banking systems. A major consideration is giving the existing financial system time to adjust and the flexibility to use safeguards to influence CBDC adoption.

## Reactions

Christine Lagarde, ECB president and chair of the group of central bank governors responsible for the reports, said: ‘Central banks have a responsibility to ensure that citizens have access to the safest form of money – central bank money – in the digital age.

‘These reports are evidence that policymakers are enhancing their domestic projects with international cooperation, sharing ideas on the best technological innovations to provide fast, easy and secure means of payment in the 21st century.’

Benoît Cœuré, Head of the BIS Innovation Hub and working group co-chair, added: ‘CBDCs can foster innovation and preserve the best elements of the current system as it evolves. This group is helping central banks to answer difficult and practical questions about how to offer safe and neutral currency with interoperable systems that harness new technology and serve the public.’

Sir Jon Cunliffe, Bank of England Deputy Governor for Financial Stability and working group co-chair concluded: ‘This collaborative input from a group of central banks will help make sure that innovation in an increasingly digital world, the role the private sector plays in any CBDC system to help it meet future payments needs, and how the financial system might evolve are carefully evaluated. These reports make sure these issues are at the centre of the debate on CBDCs.’

Read the reports on the [BIS website](https://www.bis.org/press/p210930.htm).

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