HomeLatest UpdatesCentral bank digital currency evolution in 2023: From investigation to preparation

Central bank digital currency evolution in 2023: From investigation to preparation

In the latter half of 2023, the momentum behind Central Bank Digital Currencies (CBDCs) remains robust, with 130 countries, constituting 98 percent of global GDP, actively exploring CBDC initiatives. Notably, sixty-four countries have advanced to the launch, pilot, or development phases. Significant developments include the European Central Bank (ECB) entering a “preparation phase” for the digital euro, and PetroChina achieving the first international crude oil trade using the digital yuan (e-CNY).

As the year concludes, an assessment of CBDC progress globally since March reveals substantial advancements. A pivotal development involves the Eurosystem, as the ECB initiates a preparation phase for the digital euro, aiming to provide offline services, ensure high privacy levels, and facilitate instant settlements in central bank money. After two years in the investigative phase exploring design and distribution models, the new phase, commencing in November 2023, focuses on finalizing a rulebook, selecting providers for platform and infrastructure development, and conducting extensive testing and experimentation over a minimum of two years.

A noteworthy aspect of the investigative phase is the introduction of a compensation model, designed to incentivize banks and payment service providers (PSPs) to distribute the digital euro, ensuring free-of-charge transactions widely accepted across the euro area. While the preparation phase does not include a definitive decision on issuing the digital euro, it underscores a commitment to preparation and innovation in the Eurozone’s digital currency future. The ECB’s approach emphasizes thorough research and collaboration with industry stakeholders, with expectations that insights generated during the preparation phase will play a crucial role in shaping the introduction of the digital euro, potentially influencing the broader financial landscape.

The ECB’s progress is not isolated, as various central banks globally continue to advance in CBDC development. The evolving landscape underscores the increasing significance of digital currencies in shaping the future of the global financial system.

Key Points:

  • 130 countries, representing 98% of global GDP, actively explore CBDCs, with 64 countries advancing to launch, pilot, or development phases.
  • European Central Bank (ECB) enters “preparation phase” for the digital euro; PetroChina conducts the first international crude oil trade using digital yuan (e-CNY).
  • ECB’s preparation phase focuses on offline services, high privacy levels, and instant settlements; follows two years of investigative phase exploring design and distribution models.
  • Introduced in the investigative phase to incentivize banks and PSPs to distribute the digital euro, ensuring free-of-charge transactions widely accepted across the euro area.
  • ECB emphasizes thorough research and collaboration with industry stakeholders, anticipating insights from the preparation phase to influence the digital euro’s introduction and shape the financial landscape.
  • Various central banks worldwide progress in CBDC development, highlighting the increasing significance of digital currencies in shaping the future of the global financial system.
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