A recent study conducted by the U.S.-based Atlantic Council think tank has revealed that 134 countries, accounting for 98% of the global economy, are actively exploring digital versions of their currencies. More than half of these nations have progressed to advanced development, pilot, or launch stages, indicating a significant global shift towards digital currency adoption.
The study highlights that all G20 countries, with the exception of Argentina, are advancing in the development of digital currencies, underscoring the growing trend. However, the United States is notably lagging behind in this endeavor.
Despite initial efforts to explore a “wholesale” digital dollar primarily for banks, progress towards a digital currency for the wider population in the U.S. has stalled. Federal Reserve Chair Jerome Powell acknowledged this setback, stating that there are no imminent plans for such a currency.
Although U.S. President Joe Biden ordered officials to investigate the potential of a digital dollar in 2022, the issue has become politically contentious, with Biden’s Republican opponent in the upcoming election, Donald Trump, expressing opposition to its implementation.
Josh Lipsky, from the Atlantic Council, emphasized the widening gap between major central banks regarding Central Bank Digital Currency (CBDC) development. China, Europe, and Japan are significantly ahead in this regard, posing a challenge for the U.S. to maintain its global financial influence.
While proponents argue that digital currencies offer new functionalities and alternatives to physical cash, concerns have been raised about government surveillance, leading to protests in several countries.
The report also highlighted the risk of a fragmented international payments system if the U.S. continues to lag behind in CBDC development. Additionally, Lipsky warned that Washington could lose its financial dominance if other countries establish new standards around digital currencies.
Currently, 36 pilot projects are underway globally, including China’s e-CNY, which is being trialed by 260 million people across 25 cities. In Europe, the European Central Bank (ECB) has been preparing for the digital euro for six months.
Despite progress in some regions, challenges remain evident. The Eastern Caribbean Currency Union (ECCU) recently faced issues with its digital currency, leading to its discontinuation.
The study also noted an increase in wholesale CBDC projects following geopolitical events such as Russia’s invasion of Ukraine and subsequent G7 sanctions. Cross-border projects like “mBridge” are underway, connecting countries like China, Thailand, the UAE, and Hong Kong.
All BRICS member states are making significant strides in CBDC development, with expectations of further advancements discussed at an upcoming summit in Russia.
Looking ahead, major launches of digital currencies are anticipated by 2027, with China’s digital yuan leading the way. However, the exact timeline for its full launch remains uncertain.