Main Points:
- 134 countries, representing 98% of the global economy, are exploring Central Bank Digital Currencies (CBDCs).
- Countries actively pursuing CBDCs have increased from 35 in 2020 to 66 in 2024.
- China’s digital yuan remains the largest CBDC pilot project globally.
- The BRICS nations (Brazil, Russia, India, China, South Africa) are experimenting with CBDCs to create alternative payment systems.
- Cross-border CBDC projects are expanding, particularly the mBridge project, linking several financial institutions across China, Thailand, UAE, Hong Kong, and Saudi Arabia.
- The U.S. is participating in cross-border CBDC initiatives but has restricted the issuance of retail CBDCs domestically.
- The growing movement reflects the global effort to reduce reliance on cash and adapt to the rise of cryptocurrencies like Bitcoin.
The exploration and development of Central Bank Digital Currencies (CBDCs) have rapidly gained momentum in recent years. According to the Pacific Council’s latest report, 134 countries, accounting for 98% of the global economy, are now actively considering the adoption of CBDCs. This represents a significant increase from just 35 countries in 2020. With cash usage declining and cryptocurrencies such as Bitcoin (BTC) on the rise, countries worldwide are reassessing their monetary systems to remain competitive and secure in the digital age.
1. Countries Leading the CBDC Initiative
As of 2024, 66 countries are actively working on developing CBDCs, with some nations already launching retail CBDCs to the public. Notably, the Bahamas, Jamaica, and Nigeria have successfully implemented their own CBDCs, broadening access to digital currency for their citizens. The growing interest in CBDCs marks a global shift towards digital solutions, as central banks aim to enhance financial inclusion and streamline payments.
Additionally, 44 countries, including Australia, Indonesia, Singapore, and Malaysia, are now running pilot programs for CBDCs. This number has increased from 36 just a year ago. These efforts highlight the global trend towards digitization, driven by the need to reduce the use of cash and address the growing influence of cryptocurrencies on national economies.
2. China’s Digital Yuan: Leading the Charge
China continues to be at the forefront of CBDC development with its digital yuan (e-CNY). The country’s pilot program is currently the largest in the world, with a transaction volume of $986 billion across 17 regions by June 2024. This marks a fourfold increase from the $253 billion reported in June 2023. The digital yuan has been integrated into various sectors, including education, healthcare, and tourism, showing its potential to revolutionize financial systems across industries.
The BRICS nations, comprising Brazil, Russia, India, China, and South Africa, are also making significant strides in CBDC development. Since 2023, these countries have been promoting the use of CBDCs as an alternative to the U.S. dollar in international payments. By working collectively, BRICS nations aim to establish a more secure and efficient cross-border payment system that reduces dependency on Western financial institutions.
3. The Expansion of Cross-Border CBDC Projects
The increasing complexity of global trade and geopolitics has intensified the need for seamless cross-border payments. Since Russia’s invasion of Ukraine and the subsequent sanctions imposed by the G7, the number of cross-border wholesale CBDC projects has more than doubled to 13.
One of the most notable initiatives is the mBridge project, which connects financial institutions across China, Thailand, the United Arab Emirates, Hong Kong, and Saudi Arabia. This initiative, which aims to facilitate faster and cheaper cross-border payments, is expected to expand further in 2024. The growing interest in cross-border CBDC solutions reflects the demand for a more robust international payment system, one that can withstand geopolitical pressures and improve financial integration.
4. The United States and the Agora Project
The United States, while cautious about issuing a retail CBDC, has joined six other central banks in a cross-border wholesale CBDC initiative known as the Agora project. This collaboration underscores the U.S.’s interest in exploring the potential of CBDCs for international transactions, even as domestic legislation restricts retail CBDC issuance. In May 2024, the U.S. House of Representatives passed a bill prohibiting the direct issuance of retail CBDCs, with the Senate’s decision still pending. The ongoing U.S. presidential election has also made CBDCs a political issue, further complicating their future in the American financial landscape.
Despite these domestic challenges, the U.S.’s involvement in cross-border initiatives demonstrates its commitment to remaining a key player in global finance. The Agora project is part of a broader strategy to explore how CBDCs can enhance the efficiency of international transactions while safeguarding national security.
5. The Broader Implications of CBDC Adoption
The global shift towards CBDCs reflects a growing recognition of the need to modernize financial systems in the face of declining cash usage and the increasing prominence of digital assets like Bitcoin. By enhancing access to central bank money, CBDCs could offer a more secure, efficient, and inclusive alternative to traditional payment systems.
The World Economic Forum’s 2024 report underscores the importance of CBDCs, with over 98% of the world’s central banks either researching, piloting, or issuing these digital currencies. This widespread interest highlights the transformative potential of CBDCs, not just for individual countries but for the global economy as a whole.
The Future of CBDCs
As the adoption of CBDCs accelerates, the implications for the global financial system are profound. From enhancing financial inclusion to revolutionizing cross-border payments, CBDCs represent a major step forward in the evolution of digital finance. Countries like China are leading the charge, while initiatives like the mBridge and Agora projects show the growing interest in creating efficient, secure, and resilient international payment systems.
Looking ahead, the role of CBDCs in shaping the future of global finance will depend on how well central banks can address the challenges of implementation, regulation, and international cooperation. However, one thing is clear: the world is on the cusp of a digital currency revolution, and CBDCs are at the heart of this transformation.
