In recent years, there have been various reports about governments around the world seeking to sell their own central bank digital currencies. In fact, so far, nine countries have launched active CBDC products. In this regard, China's digital rmb has been widely used during the 2022 Winter Olympic Games

Other countries carrying out similar projects include the Bahamas, the Marshall Islands and Nigeria. However, it is reported that up to now, the enrollment rate of eNaira in Nigeria is relatively low, and the phenomenon in other countries should be similar. In addition, India has also launched a data rupee demonstration point program, while the Central Bank of Spain recently decided to launch data pesos in the next year.

Although there is obvious passion, more and more voices in the popular investment community and central banks around the world once doubted the continuous legal effectiveness and feasibility analysis of CBDC. For example, Tony Yates, a former consultant of the European Central Bank, recently lamented that the "great work" related to digital currencies is not worth accepting reality and risks. He added that the recent launch of CBDC is very unusual, especially considering that most countries in the world have their current cash flow, currency and digital version number. Yates said:

"Digital money is very inappropriate. They do not have the money supply managed by people to generate relatively stable inflation channels, and it is very expensive and time-consuming to use in investment."

Similarly, Tanzania, an East African country, said in 2021 that it would launch CBDC, which is still expected. However, it recently issued a statement stressing that although it is still considering the introduction of digital currency encouraged by the state in a certain situation, it will adopt a "phased, prudent and risk-based approach" because it has encountered some tests that may affect its implementation.

The suspicion of CBDC is nothing new

Kene Ezeji Okoye, founder of Millicent Labs, a distributed bookkeeping enterprise encouraged by the European government, told Coin Telegram that in recent years, the fear of CBDC has been widespread. He quoted the brilliant speech of Jerome Powell, the current chairman of the Federal Reserve Board of the United States in 2020, "It is more important for the United States to make comparison first." This still reflects the mentality of many Fed chairmen today, In particular, the chairman of the Federal Reserve of the more developed countries.

Similarly, at the beginning of 2022, the United Kingdom Council for the Management of Economic Development Affairs of the House of Lords questioned whether CBDC was merely "seeking solutions to difficult problems". According to Ezeji Okoye, we may now hear that a large number of senior officials are hesitant about CBDC. The main reason is that during the bull market, even the most unswerving chairman of the traditional Federal Reserve feels pressure to deal with the explosion of deferred income tax in the sales market and the hot spot of digital currency. However, when the bear market in the stock market comes, critics seem to be named in groups.

This may explain why 114 countries (accounting for more than 95% of the global gross national product) are now developing CBDC. This is more than three times the number in 2020. Ezeji Okoye added:

"Although some senior officials have issued suggestions publicly, there is still a lot of work in progress at the CBDC level. At present, 18 countries in the Group of 20 are in the advanced stage of CBDC establishment. The Bank of England issued a public procurement call to develop and design the CBDC wallet after the end of 2022."

In his view, the development of management and control and the development trend of personal solutions can explain the main reason why many government departments are unwilling to rush to sell CBDC. Ezeji Okoye stressed: "Although many people still have doubts about CBDC, everyone seems to be hedging their own chips and making further efforts.".

CBDC risk

Although some authoritative experts are very active in CBDC, not everyone is interested in it. For example, Gracy Chen, CEO of Bitget, the data encryption derivatives exchange, told Coin Telegram that many territorial sovereign countries were reluctant to introduce CBDC, because people were generally worried that CBDC would affect the stability and integrity of the current financial industry system. She said:

"Recently, four countries - the Netherlands, Japan, Paraguay and Germany - have made it clear that because of many factors such as money problems and challenges encountered in the process of development, they have cancelled their CBDC adoption plans. Therefore, it is necessary to treat the formulation and implementation of the CBDC system from the perspective of development trends and take it as a whole."

At this stage, Chen believes that CBDC's common concerns include its potential to change the global financial structure from the source, because the launch of CBDC has seriously affected the traditional commercial bank savings and financial model to a large extent. At the same time, interest-bearing CBDC will migrate some of its investments to consumers with low-risk assets.

CBDC also needs large-scale project investment in assets, talents and innovation. Chen concluded: "The daily maintenance of data information, system software and services must be invested for a long time. This cost is too high for some countries to bear.".

Similarly, Clayton Mak, the product operation director of ParallelChain Lab, a blockchain application enterprise, told Coin Telegram to integrate CBDC into many network resources needed in the current financial structure and refresh the probability of system software liquidity at this stage, which in turn led to the resistance of the central bank, banks and other financial institutions, causing them to take excessive haste.

Varun Kumar, founder and CEO of Hashflow, the blockchain technology data encryption trading center, told Coin Telegram that he believed that CBDC was meaningless because most of the current currency already existed in a certain digital format.

He believed that the introduction of CBDC would complicate the problem by changing the proportion between the amount of money and M1 or M2 (i.e., the amount of money loaned by commercial banks and banks and other financial institutions), and increase the total amount of money loaned, which is the most direct debt of the central bank compared with other general currencies.

"If we completely solve the problem of physical cash, then most of the central banks can control the annual interest rate and other economic variables through very detailed and effective methods - which gives them very large financial leverage to carry out supervision - for example, China's national digital currency, digital currency mobile payment. From the measures you take, there will be very large personal privacy and independent measurement." This thing avoids Chinese citizens, "he said.

CBDC's arguments

Andrew Weiner, senior vice president of the cryptocurrency exchange MEXC, told CoinTelegram that about 90% of the world's central banks are implementing new CBDC projects, mainly because they bring various benefits. For example, they have improved payment efficiency, control reliability, financial audit clarity, reduced transaction costs and enhanced cross-border e-commerce migration capabilities. He added:

"Due to the declining demand for cash, the general interest in digital currency, and the constant concern about territorial sovereignty and the relative stability of the loan currency, central banks seem to be motivated to explore the potential of CBDC again."

Similarly, Robert Quartly Janeiro, chief strategic officer of Bitrue, a cryptocurrency exchange, believes that the introduction of CBDC is likely to change the current monetary system internationally. However, in his view, it can be said that central banks of all countries are concerned about how to affect the competitiveness of economic development in the new digital economy at this time.

The CEO of the data asset trading platform BTSE, Henry Liu, told CoinTelegram that although everyone was worried about the impact of the existing banking business, the manipulation of government departments and the lack of a strict regulatory framework to control how CBDC operates with the currency in circulation, he pointed out that:

"With the rapid development of CBDC's technology and infrastructure construction, we may see that more central banks are open to the idea of selling digital currency. The most important thing is to know that this is still a relatively new research and experimental industry. It is likely that the central bank will take some time to understand the hidden adverse effects and benefits."

Can we find the middle ground?

Mak of the ParallelChain laboratory showed that cultivating a decentralized financial ecosystem that uses both the unapproved and the approved Internet is a feasible solution, which is conducive to promoting the rapid development of CBDC.

He believes that the United Internet can not only help to improve the clarity of the transaction according to the immutable transaction, but also alleviate the problems related to the transfer delay time. In the end, it can also avoid all benefit transmission among participants in the financial industry during the implementation of CBDC.

In the same way, looking forward to the future, Weiner felt that due to the ability of commercial banks and their understanding of customer satisfaction and habits, commercial banks might play a leading role in the large-scale CBDC launch, and added:

"Commercial banks have the strongest ability in user application for registration, transaction implementation and recording, so the success of CBDC seems to lie in the public-private partnership between commercial banks and the central bank."

In this regard, the public-private strategic partnership enables the central bank to take advantage of the established infrastructure and customer relationship management. This kind of alliance helps the central bank to implement test cases that meet the needs of end-users and fill the gap in its ability and consumption concept expertise, especially in the retail scenario.

By allowing commercial banks and other personal stakeholders (i.e. technical leaders, businessmen and users) to participate in the start-up process, the central bank will also be able to shape a broader sense of ownership, effectively manage the fear of uncertainty, and improve its probability of successful selection.

Weiner concluded: "Different types of countries may pursue a CBDC approach that is perfectly consistent with their main objectives, capabilities and relevant stakeholders. The resulting multi-channel natural environment will require the Global Bank to establish and discuss its CBDC development strategy (including the world and local), and touch with the central banks of other countries.".

The road ahead

In the current severe winter of data encryption, Ezeji Okoye of the Millicent Laboratory believes that central banks do not necessarily pay attention to the latest trends in the digital currency industry. Even so, the positive development closely around the region continues.

For example, the new comprehensive reserve account structure of the Bank of England has opened the door for the private settlement platform based on DLT, which provides the same benefits as the wholesale price settlement platform provided by Fnality International (the enterprise that the Ministry of Finance of the United Kingdom issued the approval order for payment platform). Similarly, India, one of the world's largest economic powers, opened the CBDC demonstration site just a few weeks ago.

Therefore, as more and more people are deeply attracted by digital currency again, it is undoubtedly interesting to see how CBDC mode can further develop and become more mature.