Aug 29, 2023

The Atlantic Council says 130 countries are currently exploring a central bank digital currency (CBDC).

Video transcript

The state of crypto is presented by connecting the world to the power of Cryptocurrency. All right. So the Atlantic Council says 100 and 30 countries are currently exploring a central bank digital currency, also known as C BT C. Joining us to discuss this and more is the Atlantic Council's Geo Economic Center, Associate Director Anania Kumar. Welcome an, thank you Emma. Good morning, everyone. Thanks for having me on. It's our pleasure and it's good to see you again. So, you know, just for our viewers, can you just zoom out and, and tell us what you do and what you have found? Because to us as we understand it, you are one of the primary watchers of CBD C developments across the world. And you are the one who's kind of not through the lens of government financial institution looking at what's going on, who has progressed in CBD CS and who has not sure. So uh my center works across three main pillars and one of the pillars is future money which I help manage, which does quite a bit of work on central bank digital currencies or CBD CS, like you said, stable coins uh and even crypto regulation around the world. Uh But our CBD C project is probably our most flagship and well known project. We started it in uh 20 20 when there were about 35 countries looking at CBD CS in 2023. So three years later, I currently have 100 and 30 as my top line number. So that number has really grown to more than three fold in the last three years. And a lot of different factors have to do with that. A big one of course, is Russia's invasion of Ukraine and countries trying to figure out different kinds of ways of exchanging value, especially cross border value with each other. Uh Another uh sort of factor that led to it was, of course, Facebook's Libra. Um and it's dismantling and countries realizing that there could be private alternatives of moving money that the government wouldn't have um oversight over, which was uh seriously concerning to um central banks specifically around the world. And then the third bit was really the pandemic, right? Trying to figure out new moves of new ways of moving money and faster ways of moving money became a priority for governments around the world because of the pandemic. So that's what we've seen across the three years. Happy to talk about those numbers. Yeah. So I, I guess my question is we keep hearing this number 100 and 30 you know, made more famous by perhaps you than anyone else. Uh But is that misleading because CBD C are not, let's say in the mainstream right now, a lot of people across the world particularly, I'd say in developing countries, emerging countries don't even know what that means. Uh The US has not, you know, done much about it as we know. So is it fair to just say over 130 countries are, you know, exploring CBD CS or is it fair to say? But hardly any of them are actually using it? I wouldn't, I don't actually agree with you. I think there's quite a bit of countries that are in advanced stages of CBD C exploration. So beyond just researching a CBD C or developing a prototype, but actually testing it out. Um um and I don't think that they would say that they're not serious about testing it out. In fact, one of the largest economies the ECB is rolling out a pilot at the end of this year. So I would say there's quite a bit of countries that are in the, in the advanced stage by my accounts. And I think this is a fair question to ask, right, who is serious about CBD C exploration? And uh who's just saying that they're doing it by my count? About 62 of those 130 countries are in the advanced stage of exploration. What that means is that they're either developing a prototype, they're testing out that prototype or they're making legal decisions about how to deploy that prototype. Yeah, but they're not going ahead with like a green light completely like Australia just said, well, not in the near future for us. At least I think a central bank is going to take a very long time to green light. A CBD C. It's a new kind of money in its economy. It's going to impact things beyond things like financial stability, it's going to impact things like intermediation, how intermediation happens through banks in our economy. So central banks aren't going to make that decision in a few months right after a pilot and anya in these pilots, we're seeing a lot of different use cases, get tested. What's the killer use case here? Like what do you see CBD CS as being in the future? Right? So there's two main kinds of CBD CS. You see, one is the retail CBD C which I often say is how you would buy a cup of coffee. And the other is the wholesale CBD C which is how um I would be able to send money abroad and things like that. Uh A lot of interesting use cases happen in that whole. So um front, I think uh especially in the case of remittances, um I think, I think remittances themselves are a very important use case. Uh but the reduction of cost of remittances using uh any kind of Blockchain technology is very interesting for me personally to watch. Would you say retail needs a CV DC? Talk about buying a cup of coffee. There's a big educational barrier here when we're buying a cup of coffee, we're not often worried about fees that maybe people who are settling for transactions are. Do you think that the retail side of this is maybe a little bit of a stretch? I don't know if it's a stretch. I don't think there's enough testing done. I think it's going to depend on a case by case basis. First of all, uh so each economy is going to make a decision that works for itself. A lot of economies have already, especially emerging economies have already made decisions about fast payment systems that work very well for them. I think India and Brazil are very good examples of that. Um I don't know if they're going to decide to do a full rollout of a retail CBD C. It's again going to depend on economy by economy, uh depend on their specific needs. I don't know if it's a, a fully bad decision to have a retail CBD C. Even in the United States, there's about 5% of people that are um unbanked and around 25% of people that are underbanked. So there might be an argument there for reaching 30% of our economy that doesn't use its bank account that doesn't use its credit card as frequently. So, Anania, as we know when you mentioned the US, uh we've had presidential hopefuls uh say a lot of things about uh the privacy aspect of CBD C that it violates privacy. Uh And I want to get into the US presidential race and I'm sure agenda is also in a bit, but I wanna just talk about how that's the concern because the basic point is you can't trust on two banks, right? Uh with, with your money. Um And, and, and the other thing is that we're already seeing, you said 100 and 30 CPD C exploratory projects or, and then more than 60 in advanced stages. But are you seeing these central banks and these authorities already being transparent when there are questions of the fact that, well, we can't trust you with our money anyway, so that I think privacy is a very important question and it is the question to ask when it comes to CBD CS, right? Um A lot of banks, central banks don't really use what the prototype models look like. Don't tell you enough about what information is going to be collected. Uh And what will they have versus what you can erase um on the ledger things like that. So they are very important questions about privacy to be asked. And I think a lot of president potential hopefuls are getting to that point. However, a lot of the research that we've done actually a paper that we wrote last year uh talks about different kinds of privacy models of CBD CS. And the conclusion that we came to was that the most cyber secure CBD C was actually also the most private CBD C. Uh And so there's sort of this, this idea that security and privacy is at balance with each other is not really true. Uh You could actually create both resilient models for both and there's options for private CBD CS for CBD CS that protect your privacy. I think that's what I want to leave with. Uh There's options for CBD CS that protect uh privacy for everyone and uh if central banks wanted, they could use those models over others. Now, the concern there is that uh some central banks might not want to do it. I do see some positive examples. I think for the ECB privacy emerged as one of the most central issues concerning central bank digital currencies. Um as is uh from the recent Australia paper that you mentioned for them for the Reserve Bank of Australia too. I see some positive examples of countries trying to build trust into their ecosystem of trying to build actually private CBD CS. So I see some positive movement there and then, yeah, we have an election coming up in the US in 2024 and CBD CS are of course becoming a hot political issue here in the US presidential hopeful, Ron desantis is promising to ban a digital dollar if he's elected. I know that you wrote an opinion piece for coin desk about this. Um talk to us a little bit about your opinions there and how the United States CBD C stands compares to other countries. Sure. So in terms of uh us CPD C, we say that it's in uh the development stage of its development uh of, of its exploration, which means that uh the, the fed uh along with many other partners is considering how to develop a prototype and where to get in terms of G 20 countries. Uh 19 of the G 20 countries are in the advanced stage of exploration, but nine of them are in the pit stage. Of course, the big sample that gets brought up in the US is China, but it's also Russia, India, other really large um G 20 economies that are considering it, the US is further behind other economies and where they are comparatively is that these economies are conducting real experimentation, real research, developing prototypes, seeing if they fit our use cases or seeing what kind of use case is going to arise and then making the decision on whether or not to use them. Um I don't think the US is at that point yet, the US is still uh kind of deciding quite a bit on their regulatory uh side of can someone issue A CBD C is the fed allowed to with or without congressional authorization? Of course, there's some experimentation that has happened on the wholesale side in the US. There's a project Cedar that was released last year uh along with the New York Fed and uh the Bank of Singapore, the Voluntary Authority of Singapore. So there's some experimentation happening on the wholesale side, not quite a lot on the retail side. Uh And of course, there's an inherent politization of this issue, right. There's a lot of people who want to talk about CBD CS um in, in the political race and I think it's only going to get more heated um as time goes. Yeah. Now sticking in the US, of course, Fed now has launched, the FED has said that this is not a precursor to a CBD C. Uh What are your thoughts on fed? Now, do you think it could lead to a CBD C in the US? So I think of fed now and CBD CS as completely different technologies. The FED is testing out a fat uh an instant payments technology uh which is something that uh G 20 central banks like the UK, like Mexico, like India have been doing for the last, essentially the last decade. So um it's something that the US is doing now that others have done. It's not really a precursor of CBD CS because it really updates the infrastructure between banks and doesn't really do anything about retail CBD CS. So I think the conflation of both is a little bit of a misnomer and Anya, thanks. So much for joining the show this morning. It was a pleasure having you. Thank you so much. Uh Have a nice day. That was Atlantic Council Geo Economics Center, Associate Director, Anania Kumar.

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