Recap on 2019: What Does the World Think of Central Bank Digital Currencies?

The European Central Bank Report on CBDCs 

The European Central Bank has recently developed an “anonymity voucher” to safeguard potential central bank digital currency (CBDC) users’ privacy for low-value retail transactions while ensuring that high-value transfers are subject to anti-money laundering (AML) approvals.   

The new concept provided by the ECB aims to solve the issue of anonymity in digital currency transactions, striking a balance between allowing Europeans to have private transactions as well as satisfying the need for regulators’ demand of AML rules. 

The proof of concept was drawn up by the European System of Central Banks (ESCB), to demonstrate the possibility of a simplified CBDC payment system, allow for some degree of privacy for transactions. 

China’s CBDC Aims to Make Alipay and WeChat Pay Redundant 

Mu Changchun, the Director-General of the Institute of Digital Currency of China’s central bank, People’s Bank of China, made a comment regarding China’s central bank digital currency (CBDC), also known as the digital currency electronic payment (DCEP), saying that they are “trying to provide redundancy to our very advanced electronic payments” including WeChat Pay and Alipay.  

The reason behind the comment was due to the potential risks the central bank foresees if there would be any technical difficulties with these electronic payment entities, there would be detrimental harm to the financial ecosystem. Mu added that this move was to “prepare for anything bad to happen,” given that 96% of China’s population is using electronic payment systems.  

Mu briefly introduced the two-tiered system that the CBDC will be running on and noted that commercial banks will be in the loop. He also highlighted that the CBDC is targeting cross-border payments and the M0 - which refers to the Chinese Yuan fiat in circulation. 

The US Federal Reserve Considers Exploring a Digital Dollar 

The United States Federal Reserve has been looking into the potential development of a CBDC. The Federal Reserve Board Chairman Jerome Powell told US Representatives in response to French Hill and Bill Foster’s request. Powell explained the Federal Reserve’s views on the creation of a CBDC, although emphasizing that the agency is not currently developing a CBDC, the agency has been evaluating its benefits and risks. 

The Federal Reserve must address a number of legal questions, according to Powell, including those of monetary and payment policies, financial stability, supervision, and operational issues, as well as their exposure to cybersecurity issues.  

Powell said, “If it is designed to be financially transparent and provide safeguards against the illicit activity, a general-purpose CBDC could conceivably require the Federal Reserve to keep running record of all payments data using the digital currency [...] and sometimes that raises issues related to data privacy and information security.” 

South Korea’s New CBDC Task Force 

The Bank of Korea, the country’s central bank plans to put together a task force dedicated to CBDC research in 2020. The central bank plans to recruit external experts in the field, posting a job listing for digital currency experts, according to the Korea Times.  

In its “Monetary Policy for 2020” document, the central bank stated that it would continue its research on distributed ledger technology, cryptocurrencies, and CBDCs to enhance the security of payments and settlement systems. 

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