Central bank digital currencies (CBDCs) are gaining wider acceptance by the day. While only 9 countries have launched crypto CBDCs, 14 are in the pilot stage, 16 are developing technology and 40 are conducting research – in all, 87 countries are exploring CBDC technology – the race for the future of money is well and truly on. 

France is the latest country to join the discussion, as it completed the first stage of CBDC experimentation on Thursday (16th December). That said, what exactly is a CBDC?

## What is a CBDC?

A CBDC is essentially a digital form of fiat currency issued by a central bank. It can be in the form of a retail currency or a wholesale currency. A retail CBDC is intended for public use while a wholesale CBDC is meant to serve as a medium of exchange between financial institutions. 

Both forms of technology are backed by the full credit of a government. CBDCs will make purchasing goods, sending local and cross-border payments and layering possibilities on transactions much easier, among other possibilities. 

While private cryptocurrencies offer these capabilities in several shapes and forms, they are decentralised, not centralised and controlled by a government. 

## France's CBDC quest

On Thursday, The Banque de France completed the first stage of wholesale CBDC experimentation. The next step is exploring cross-border transactions. Interestingly, France has been exploring wholesale CBDC technology since March 2020. 

France conducted experiments with numerous partners, including HSBC, the final stage of which was issuing a digital bond on a blockchain with settlement in wholesale CBDC. The Banque de France is exploring a retail CBDC as well. 

## Conclusion

As private crypto assets are gaining prevalence and people are avoiding the use of cash (apps like Google Pay and [Cash App](https://cash.app/) are being increasingly used), governments all over the world are looking at CBDC technology to combine the power of crypto with the craze of digital currency.

For more Business news, see [here](/news/category/crypto-business-news).


France Jumps on Crypto CBDC Bandwagon

Existing payment platforms and financial infrastructure charge extravagant fees to process cross-border crypto transactions.

The exchange rate of a currency comes into play as well when you transfer funds to your local bank account. Plus, the rate at which the conversion (from let's say US Dollar to Euro) takes place is lesser than the market rate – of course, an appropriate margin prevents the possibility of a payment platform incurring a loss while the transfer ID is taking place.

To add to that, you have to wait for a few working days (one to two working days if you're lucky) for the funds to reflect on your account.

Cue cryptocurrencies - cryptocurrencies are bound to make cross-border transactions quicker, securer, cheaper and more transparent.

Following our report on recent research which indicated that cryptocurrency is becoming the top choice for cross-border trade, we look at the subject in more detail.

## Crypto Will Shape the Future

Central Bank Digital Currency (CBDC) technology and cryptocurrencies like [Ripple](/coins/xrp) are bound to make cross-border transactions easier. [El Salvador adopted Bitcoin (BTC) as a legal tender](https://www.investopedia.com/el-salvador-accepts-bitcoin-as-legal-tender-5200470) for many reasons, of which one was to ease the process of transferring money overseas.

While Bitcoin is not the global standard for overseas payments, CBDCs must be looked at with intent.

CBDCs will make it easy to transfer money abroad and will offer much-needed transparency and traceability – officials will be able to track transactions and pinpoint suspect cases of financial fraud and money laundering. They are a fantastic solution for the unbanked and offer the possibility of layered transactions.

For example, you could make a cross-border payment to your parents and program the payment to execute on their anniversary. While it will take time to transform legacy solutions into modern, crypto-based infrastructure, the future of the crypto industry in global finance is bright. We will see a substantial shift in the due course of this decade.

Crypto Q&A: The Future of Cross-Border Transactions

A senior UK Government member has admitted a retail central bank digital currency (CBDC) for the country may not arrive until the second half of this decade.

While confirming it will take ‘several years’, John Glen, Economic Secretary to the Treasury, also sounded a note of caution about whether a UK CBDC will even go ahead.

The UK is actively exploring the potential for a retail central bank digital currency to complement to cash and bank deposits.

If it proceeds, it would be a new form of digital money, denominated in Sterling and issued by the Bank of England, for everyday payment use.

## Delivering UK CBDC Would Require Lots of Work

In early 2021, the UK Chancellor of the Exchequer created a taskforce to explore a retail central bank digital currency and moves to engage stakeholders including consumer groups, businesses and tech experts. The intention is to ensure UK authorities approach consideration of a CBDC in a coordinated way.

So far, no decision has been taken, and more consultation is due to start next year.

Delivering an update on the project, Mr Glen said: ‘Exploring and delivering a UK CBDC, if there were a decision to proceed, would require carefully sequenced phases of work, which will span several years.

‘HM Treasury and the Bank of England will publish a consultation in 2022 setting out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model.

‘If there is a decision to proceed following the consultation, a development phase would include the publication, by the Bank of England, of a technical specification to explain the proposed conceptual architecture for a UK CBDC. This development phase could involve in-depth testing of the optimal design for, and feasibility of, a UK CBDC.’

## Liaising with International Partners

This could then lead to a build and testing phase, but Mr Glen warned : ‘Given the scale and national importance of such a project, this phase would likely take several years and could involve the development of large-scale prototypes and live pilots.

‘Were the results of each of these phases to conclude that the case for CBDC were made, and that it were operationally and technologically robust, then the earliest date for launch of a UK CBDC would be in the second half of the decade.’

The UK Government will also liaise with international partners on the global implications of any such move.

[Read the full statement by John Glen](https://questions-statements.parliament.uk/written-statements/detail/2021-11-09/hcws381)

Bank of England CBDC Would Take ‘Several Years’

The findings of a major study of digital currencies by several central banks have been published.

The Bank of International Settlement (BIS) and seven central banks have conducted work on retail central bank digital currencies (CBDCs) and analysing policy options and practical implementation issues.

## Digital Currencies Report

Three reports have been published exploring how CBDCs could best meet users' future needs through developing interoperable systems that support private innovation while preserving public trust.

A statement from BIS said extensive cooperation and dialogue will be required to develop and run a CBDC, preserving the centrality of central bank money for future systems that anchor public trust and support public welfare

It adds: ‘For central bank digital currencies (CBDC) to work effectively, public and private institutions need to cooperate to ensure integration with existing payments systems; to anticipate customers' future needs; and to support innovation while preserving public trust, privacy and stability in the broader financial system.’

## Initial Research

A group comprising Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Sveriges Riksbank, Swiss National Bank and BIS, has built on initial research into CBDC foundational principles from 2020.

Although a retail CBDC is yet to be issued by any of these banks, this ongoing research is seen as a positive step for the wider adoption of cryptocurrency.

The BIS statement continues: ‘Delivering on the future needs of consumers would require systems that encourage innovation, choice and competition among a diverse mix of intermediaries.’

## Detailed Study

The first report looks into how CBDC systems can be designed with private-public collaboration and interoperability to achieve that objective. The report acknowledges that running a CBDC system would be a major undertaking for a central bank, especially ensuring policies were in place to protect privacy and govern access to payment data.

The second report explores how, in a fast-changing tech landscape, a CBDC could serve individuals and organisations best. Learning from the lessons of previous payment innovations, the report recognises that utilising existing networks is often required.

Outlined in the third report are the potential implications of CBDC on banking systems. A major consideration is giving the existing financial system time to adjust and the flexibility to use safeguards to influence CBDC adoption.

## Reactions

Christine Lagarde, ECB president and chair of the group of central bank governors responsible for the reports, said: ‘Central banks have a responsibility to ensure that citizens have access to the safest form of money – central bank money – in the digital age.

‘These reports are evidence that policymakers are enhancing their domestic projects with international cooperation, sharing ideas on the best technological innovations to provide fast, easy and secure means of payment in the 21st century.’

Benoît Cœuré, Head of the BIS Innovation Hub and working group co-chair, added: ‘CBDCs can foster innovation and preserve the best elements of the current system as it evolves. This group is helping central banks to answer difficult and practical questions about how to offer safe and neutral currency with interoperable systems that harness new technology and serve the public.’

Sir Jon Cunliffe, Bank of England Deputy Governor for Financial Stability and working group co-chair concluded: ‘This collaborative input from a group of central banks will help make sure that innovation in an increasingly digital world, the role the private sector plays in any CBDC system to help it meet future payments needs, and how the financial system might evolve are carefully evaluated. These reports make sure these issues are at the centre of the debate on CBDCs.’

Read the reports on the [BIS website](https://www.bis.org/press/p210930.htm).

Latest Moni

#CBDC

Read the latest CBDC crypto news.

France Jumps on Crypto CBDC Bandwagon

Crypto Q&A: The Future of Cross-Border Transactions

Bank of England CBDC Would Take ‘Several Years’

Central Banks Conduct Group Digital Currency Study

SEC crypto chronicles- Gary Gensler affirms BTC as commodity

FTX founder says no talks to buy Robinhood

Bitcoin Scam Instagram: Why this Phrase Matters