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Review on the research progress of global central bank digital currency in 2021

Time : 26/01/2022 Author : fhbvac Click : + -
        The article summarizes the research progress of the global central bank's digital currency in 2021. The economies that have launched CBDC are all small Caribbean economies. The research and development of CBDC is significantly accelerated. There are many commonalities in the CBDC being studied by all parties, but the emphasis is different. At the beginning of 2021, the bank for International Settlements (BIS) released the central bank digital currency (CBDC) questionnaire, which pointed out that among the 65 central banks participating in the questionnaire, 56 had started the research and development of CBDC, accounting for 86% of the total. Most of the small economies did not carry out relevant work. Specifically, about 60% are in the process of testing or proof of concept, and 14% have entered the pilot stage.
        The progress of CBDC of various central banks can be divided into four categories. The first category is that CBDC has been launched; The second type is that the R & D test has been carried out or the CBDC pilot has been launched; The third type studies and analyzes the feasibility of launching CBDC; The fourth category believes that there is no need to issue CBDC in the short term, or it has not made a statement. Since 2021, more and more economies have significantly accelerated their research and development of CBDC. Following the Bahamas, the Eastern Caribbean region also issued central bank digital currency. Sweden and South Korea have started pilot projects; Major economies such as the euro zone, Japan and Russia have decided to launch CBDC and enter the stage of proof of concept or R & D; India, Turkey and Brazil will start testing at the end of 2021 or 2022; Although Britain and Canada have not made the decision to issue CBDC, they continue to carry out research and technical preparation; The Fed's attitude is still slightly negative, but its technical preparation is not lagging behind.
        The Bahamas and the Eastern Caribbean have issued central bank digital currencies. The Central Bank of the Bahamas launched the sanddollar project pilot in December 2019, and announced in October 2020 that the world's first CBDC "sanddollar" was officially launched. It was issued by the Central Bank of the Bahamas to nearly 400000 residents of 700 islands to improve financial inclusiveness, combat money laundering or illegal economic activities. "Shayuan" is linked to Bahamas dollar and positioned at retail CBDC. Bahamian residents can make mobile payments on mobile devices using electronic wallets authorized by the Central Bank of Pakistan. The Eastern Caribbean Central Bank launched the development and testing of digital currencies in March 2019, and officially launched the official digital currency dcash on March 31, 2021, becoming the first monetary union to launch CBDC.
        Dcash is linked to the Eastern Caribbean dollar and is issued by the Eastern Caribbean Central Bank and distributed by licensed banks and non bank financial institutions. In addition, Venezuela issued petro, which is supported by oil reserves, in February 2018. However, due to the sanctions of the United States and the lack of assets backed by petro, the price of petro continued to fall, which has basically failed. Ecuador launched the digital dinero (DE) in 2014, but due to the default of the government's sovereign debt in 2018 and other issues, the market recognition of the digital dinero was extremely poor, and it stopped operating in April 2018. The ECB has shifted from feasibility study to R & D for digital euro.
        In April this year, the public consultation report on the digital Euro released by the European Central Bank showed that most respondents supported the digital euro, paid the most attention to its privacy characteristics, supported banks and other payment institutions to play an intermediary role, and supported cross-border payment. On this basis, the European Central Bank has officially launched the research and development of the digital euro project in July this year, which will last for two years. It plans to launch the digital euro before 2025. The CBDC project approved by the Swiss central bank has completed the proof of concept and started to study cross-border use. The Swiss central bank cooperated with the innovation center of the Swiss Stock Exchange (six) and the bank for International Settlements (BIS) to carry out the "Helvetia" project to study the use of DLT to use wholesale CBDC for digital asset trading and real-time settlement.
        The project includes two phases. The first phase of the concept verification has been completed by the end of 2020. The Swiss central bank and the Swiss stock exchange have conducted the DVP test and verified that the distributed wholesale CBDC can interoperate with the centralized real-time full payment system (RTGS). The second phase focuses on the proof of concept of cross-border payment, and will clarify the legal, governance, regulatory and policy issues. In addition, in June this year, the Swiss central bank, together with the Bank of France, the bank for International Settlements and the innovation center, cooperated with Accenture, Credit Suisse and other private sectors to carry out the "Jura" project. Based on the DLT platform, the "Jura" project explores cross-border settlement between wholesale CBDC and financial instruments, converts French digital financial instruments into wholesale digital euros through DVP, and converts wholesale digital euros into wholesale digital Swiss francs through synchronous settlement (PVP).
        The Bank of Japan has entered the CBDC concept verification stage, and relevant work has been accelerated. In April this year, the Bank of Japan announced the launch of the CBDC concept verification. The first phase is to develop the CBDC system test environment, conduct experiments on the issuance, distribution and recovery of CBDC, and explore the basic functions and technical feasibility of CBDC, which will last until March 2022. In the second stage, additional functions of CBDC will be realized in the test environment and technical experiments will be conducted. The third phase will carry out a pilot to verify the design and function of CBDC at the payment platform and end-user level. More than 30 companies, including Japan's three major banks, announced that they planned to launch a unified payment and settlement platform for digital currency this year to promote the interconnection of digital currency infrastructure.
        The Bank of Canada has taken the lead in the research and development of CBDC, but there is no plan to issue CBDC. Jasper project was jointly initiated by the Bank of Canada and the private sector in 2016. The main technical route is distributed account book technology, which is positioned as a wholesale digital currency and mainly used between the central bank and commercial banks. At present, the project has entered the fourth stage. It cooperates with the monetary authority of Singapore and the Bank of England to conduct cross-border currency clearing experiments. However, the Bank of Canada said that the Jasper project is only to build the ability to issue CBDC. The existing Canadian monetary system can well meet the public demand. If it is not necessary, CBDC will not be issued.
        Sweden has entered the pilot phase of CBDC. In February 2020, the Swedish central bank launched the test of retail CBDC "e-krone" based on blockchain technology. Local residents can deposit and withdraw "e-krone" and make mobile payments through the E-wallet authorized by the central bank. In April this year, the Swedish central bank released the first phase report of e-krona; In May, the Swedish central bank announced that it would cooperate with external companies in the next stage to test the method of integrating e-krone with external systems, including the connection with the euro zone prompt payment and settlement platform (TIPS). Among the major emerging economies, South Korea, Russia, Brazil, Turkey, South Africa and India made rapid progress.
        South Korea has changed its early wait-and-see attitude and has entered the pilot stage. In February 2020, the Central Bank of Korea established a special digital currency research group and CBDC technology department. In April 2020, it issued the CBDC development plan. At present, the scheme design and external consultation stage have been completed. In 2021, it entered the pilot system construction stage, and began the pilot in August this year. CBDC was issued based on the blockchain platform of the local telecom company kakao. The pilot work is divided into two stages. The first stage (August December 2021) tests the issuance, circulation and recovery of digital Korean won, and the second stage (the first half of 2022) tests the functions of offline payment, digital asset purchase and cross-border payment of CBDC.
        At present, the Bank of Korea has not announced its CBDC design framework and technical route, but the market speculates that its CBDC design framework may be similar to digital RMB, focusing on the retail payment field, adopting a two-tier operation structure, relying on financial institutions to launch or recover CBDC, and adopting controllable anonymity. Russia has issued a digital ruble white paper and plans to carry out the test in 2022. In April this year, the Central Bank of Russia issued a white paper on the digital ruble, explaining the positioning, model selection and technical methods of the digital ruble. The Central Bank of Russia plans to complete the construction of the digital ruble platform prototype by the end of the year and test it in the first quarter of 2022. The test is divided into two stages. In the first stage, it is planned to connect banks and other credit institutions with the Russian Ministry of finance. In the second stage, it is planned to connect various financial institutions, introduce the offline mode, support the exchange of digital rubles into foreign currencies, and consider opening digital wallets for non residents.
        Brazil and Turkey have recently announced that they will conduct the test pilot of CBDC. In August 2020, the Central Bank of Brazil set up a working group to study digital currency issuance to analyze the digital currency issuance model and its potential impact. In May 2021, the Central Bank of Brazil issued CBDC guidelines to explain the objectives, forms, payment system and legal principles of digital currency. On September 3, the president of the Central Bank of Brazil said that he planned to establish a digital currency innovation laboratory and carry out digital currency pilot work in 2022. On September 15, 2021, the Central Bank of Turkey announced the establishment of the "digital Turkish Lira cooperation platform" to study the potential benefits of introducing Turkish Lira digital currency to supplement the existing payment infrastructure.
        The Central Bank of Turkey has signed cooperation agreements with many institutions, including technology contracting companies (aselsan and havelsan) and science and technology information research centers (tbitak and bilgem). At present, the cooperation project has completed the proof of concept stage, and the next stage of development and testing of relevant strategies and key technologies is started. At present, the Central Bank of Turkey has not made a final decision on whether to issue the digital Turkish Lira. The results of the first phase of research and testing will be published in 2022. South Africa's research and development of CBDC involves retail and wholesale CBDC, but the attitudes towards these two types are quite different. In terms of retail CBDC, South Africa is cautious. At present, it has only announced the feasibility study and has not decided whether and when to issue it. It is expected to complete the feasibility study in 2022.
        For wholesale CBDC, the Bank of South Africa has cooperated with the private sector to develop the Khokha project based on DLT and blockchain technology to improve the transaction settlement efficiency among financial institutions. At this stage, Khokha project has entered phase II, focusing on integrating wholesale CBDC into the existing monetary system. On September 2, the Bank of South Africa joined the Dunbar project of the Singapore Branch of bis innovation center, and jointly launched the project with the central banks of Australia and Malaysia and the Singapore monetary authority to test the use of CBDC in international settlement. India is studying the advantages and disadvantages of CBDC and the technical route, and is formulating the route month for the implementation of CBDC. The Central Bank of India said that the Central Bank of India will focus on the security of CBDC and its impact on the financial industry, monetary policy and currency in circulation, and explore the advantages and disadvantages of digital rupee choosing centralized ledger and distributed ledger technology, and will conduct a proof of concept based on the research results.
        Among other emerging economies, the Central Bank of Saudi Arabia and the Central Bank of the United Arab Emirates jointly launched the ABER project in January 2019. It is proposed to launch a common CBDC for cross-border transactions between the two jurisdictions. At present, the technical feasibility has been verified. The Bank of Indonesia announced in August 2021 that it would launch a digital Indonesian rupee based on the blockchain. In August this year, the Central Bank of Thailand announced that it would test retail central bank digital currency in the second quarter of 2022, and launched the inhanon Lionrock cross-border CBDC research project with the Hong Kong Monetary Authority. The project was expanded into a multi currency CBDC project with the support of the BIS innovation center. The Institute of statistics of the people's Bank of China and the Central Bank of the United Arab Emirates also participated in it.
        The Federal Reserve pays more attention to CBDC, but it is still in the research stage as a whole and is not in a hurry to launch digital dollar. In August 2020, the Federal Reserve announced that it had launched distributed account book technology and blockchain testing to study the impact of the central bank's digital currency on the payment system, monetary policy and financial stability. The Boston Federal Reserve and the Massachusetts Institute of Technology (MIT) have been developing technical prototypes of the digital dollar platform and have promised to release open source code. However, the Federal Reserve has not yet decided whether to issue digital currency. Powell has repeatedly stressed the need to carefully study and carefully deal with the issue of whether to issue digital dollars to avoid catastrophic mistakes. The Federal Reserve believes that clear policy objectives, broad support from stakeholders, a sound legal framework and strong technical support are the prerequisites for issuing digital dollars.
        The Federal Reserve will issue a discussion report on CBDC, focusing on the benefits and risks of issuing CBDC in the United States, and soliciting public opinions on issues such as payment, inclusive finance, data privacy and information security. The UK has set up a CBDC working group, but has not yet decided whether to launch it. In April this year, the Bank of England and the Ministry of Finance jointly set up a CBDC working group to study the central bank's digital currency issue. In addition, the Bank of England has also set up two external forums to discuss with other stakeholders on the non-technical and technical aspects of CBDC. The Bank of England has set up a CBDC department to be responsible for the coordination and external liaison of internal CBDC work.
        The Bank of England released two CBDC discussion reports in July 2020 and 2021 respectively to solicit public opinions on the use scenarios and policy issues of CBDC. According to the high-level statements of the Bank of England, many of the UK's ideas on CBDC are consistent with the basic principles and core characteristics of the BIS on CBDC. The UK considers itself as the "thought leader" in this regard, but it still needs to further study before making a decision on whether to issue CBDC. New Zealand and Trinidad and Tobago made it clear that it is too early to discuss CBDC at present and will not give priority to research and development of CBDC.
        Argentina and Mexico believe that due to the relatively perfect domestic electronic payment system, there is no urgency to issue CBDC. Chile, Jamaica and Uruguay are on the sidelines. Both Chile and Jamaica have developed or planned to develop CBDC, but no details have been released since. The Central Bank of Uruguay launched the e-peso pilot project as early as 2017. The pilot project ended in April 2018, and has been stagnating since then. The economies that have launched CBDC are all small Caribbean economies. The common characteristics of the Bahamas and the Eastern Caribbean Economic Community are that the islands are numerous but the population is sparse, the coverage of financial services is low but the penetration rate of mobile phones is high. The issuance of CBDC is conducive to improving financial inclusiveness and facilitating cross-border payment and settlement.
        Small economies try to issue CBDC first, which is conducive to accumulating experience and avoiding the problems of currency dominance caused by large economies issuing CBDC. The R & D work of CBDC was significantly accelerated. Major economies such as the euro zone, Japan and Russia have decided to launch CBDC, which has entered the stage of proof of concept or R & D; Turkey and Brazil will start testing in 2022; Although Britain and Canada have not made the decision to issue CBDC, they continue to carry out research and technical preparation; The Fed's attitude is still slightly negative, but its technical preparation is not lagging behind. There are many commonalities in the CBDC under study, but the emphasis is different.
        The common points include two-tier operation structure and avoiding impact on commercial banks, balancing privacy protection and information disclosure, emphasizing inclusiveness, interoperability with existing systems, etc. most of the technology paths are based on DLT technology, and cooperation with the private sector. Except for Switzerland, South Africa and Canada, which focus on batch type CBDC, most economies focus on research and development of retail type CBDC. The eurozone, Switzerland, Sweden, Canada, Saudi Arabia and the United Arab Emirates have attached importance to CB from the beginning
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