By George Ward
Over the past few years, reports making the rounds revealed that several governments worldwide have begun to explore the development of their in-house digital currencies to stop the growth of private cryptocurrencies.
So far, nine countries are reported to have rolled out their central bank digital currency (CBDC) to control the rise of privately issued digital assets within their jurisdictions.
Doubt Over CBDC’s Long-Term Use
As the CBDC wave continued to gain traction, China’s digital Yuan was widely used during the 2022 Winter Olympics. Hence, experts state that this signifies the beginning of CBDC adoption.
Other countries that have carried out similar projects include Nigeria, The Bahamas, and the Marshall Islands. However, Nigeria’s CBDC project, the e-Naira, has seen low adoption since its launch, with the country’s crypto-enthusiasts not keen on using the new centralized token.
Other nations’ CBDC has fared similarly to that of Nigeria. Furthermore, India and Mexico have announced their digital Rupee and Peso pilot launch, respectively, as the CBDC adoption continues to soar.
Amid the ongoing enthusiasm for CBDC development, there is a growing number of skeptics from the mainstream finance sector and some of the world’s central banks. In addition, CBDC’s efficacy and viability in the long term have become the topic of debate among executives from private and public financial institutions.
According to Tony Yates, a former executive at the Bank of England (BoE), the vast resources plunged into the development of CBDCs are questionable. Yates added that governments’ increased digital asset rollout is quite suspicious, considering that some countries already have a digital version of their existing fiat currencies.
The former adviser noted that crypto assets are bad candidates for money because they need the features of fiat that humans can manage to generate utilities.
Nothing New
According to the co-founder of Millicent Labs, Kene Ezeji-Okoye, criticism of CBDC is a familiar thing as it has been prevalent in the past few years. Ezeji-Okoye cited the 2020 speech of the chair of the US Federal Reserve, Jerome Powell, when he stated that the US should focus on getting it right than being the first.
Accordingly, Powell’s speech resonates with the sentiments of most central banks’ bias against cryptocurrency, especially those from advanced economies. It is worth noting that Millicent Labs is a UK government-backed distributed ledger company helping the BoE with its ongoing CBDC trials.
Like the US, the UK’s House of Lords Economic Affairs Committee questioned using CBDC as an effective solution to a problem early last year. Furthermore, Ezeji-Okoye stated that the industry would keep seeing more government officials speak about their perception of CBDC due to the bull run.
The Millicent Labs co-founder explained that even the most ardent traditional central bankers are usually pressured to respond to the rising hype of crypto and the increasing market capitalization during the bull rally. However, despite the skepticism and the risks of CBDC on the traditional financial system, experts see digital assets as something that is here to stay.