The 15th G20 Leaders Summit this year was hosted by King Salman bin Abdulaziz Al Saud of Saudi Arabia. The event took place on Nov 21-22 and was virtually held.
During the said meeting, China President Xi Jinping has encouraged his fellow members to openly support the Central Bank Digital Currencies. This is after addressing the issue about the COVID 19 pandemic. An excerpt from his letter to the G20 summit attendees’ states:
“The G20 also needs to discuss developing the standards and principles for central bank digital currencies with an open and accommodating attitude, and properly handle all types of risks and challenges while pushing collectively for the development of the international monetary system.”
Since 2014, China has already been exploring CBDC and committed significant resources. On Oct 18, the digital yuan was launched. In connection with this People’s Bank of China (PBOC) and the Shenzhen municipal government initiated the “Luohu Digital Renminbi Red Packet” giveaway. In the conclusion of the giveaway program, 50,000 people were chosen as recipients for the giveaways. They were given 200 yuan in central bank digital currency (CBDC). On Oct. 23, it published a draft law to legalize China’s central bank digital currency (CBDC), the digital renminbi or e-CNY.
The creation of the digital yuan was supposedly in response to Facebook’s digital currency “Libra” and COVID 19 pandemic.
Meanwhile, U.S. Federal Reserve Chair Jerome Powell in a recent interview said the Fed has made no decision yet regarding the issuance of a digital currency. But they are actively participating in research into partnership with other central banks and the Bank for International Settlements.
“One set of experiments is being carried out at the board of governors here in Washington, D.C.Complementary efforts are also now underway, for example through the Federal Reserve Bank of Boston, which, in collaboration with researchers at MIT (Massachusetts Institute of Technology), is developing a hypothetical central bank digital currency.”
Powell also stressed the need to protect CBDC from online threats and other malicious and illegal activities.
“Just to mention a few, I would mention the need to protect a CBDC from cyber attacks, counterfeiting and fraud, the question of how a CBDC would affect monetary policy and financial stability, and also how could a CBDC prevent illicit activity while also preserving user privacy and security.”
Other countries already have plans to launch their own digital currencies. In 2017, the Swedish Riksbank started its CBDC project dubbed as the e-krona. The launching of the digital currency was mainly due to the declining use of cash in the country. A lot of countries have followed suit like the Bahamas, Eastern Caribbean Currency Union, and the Marshall Islands.
Paypal CEO Dan Schulman has also expressed its support for CBDC during the Q3 earnings call.
Not only companies but also countries are now seeing the potential of CBDC. With a growing trend in crypto adoption, inflation, and other threats including the pandemic, countries have seen the necessity of creating their own CBDC. Who will be next? Will other countries follow suit sooner than we expected?