China said this week that it is close to launching its central bank digital currency (CBDC) after more than a year’s work to put the framework in place to support the digital yuan.

Facebook’s announcement this year, that it planned to launch the Libra cryptocurrency prompted many central banks to voice their concerns over the risks to monetary stability of a large corporation issuing its own currency. Project Libra also drove renewed efforts by central banks to adopt digital currencies of their own for use in payments systems.

Such has been the clamour over Libra that central banks, which fear losing control of their cross-border transactions, that the monetary authorities of several countries are now at varying stages along the development cycle to launching digital offerings of their own.

China’s Digital Yuan

Mu Changchun, deputy director of the People’s Bank of China’s (PBoC) payments department announced at a weekend event – reported by Bloomberg on Monday – that China’s CBDC was “close to being out”.

The central bank’s intention is for the digital yuan to replace and augment cash in circulation – M0 money rather than M2, which would generate credit and add to the country’s household debt problem.

By using the digital yuan in this way, it will help support the domestic currency’s circulation, Mu said, as well as broadening internationalization of the yuan – an ongoing project to make the national currency accepted in global trade and financing.

The PBoC reacted strongly to the announcement of Libra, saying it posed a risk to the authority of monetary policy and could have destabilizing effects on foreign exchange. The digital yuan was, therefore, fast-tracked so that Chinese citizens will become more familiar with it in payments systems ahead of the Libra launch.

Singapore and Canada Join Hands

A joint project between the Monetary Authority of Singapore (MAS) and the Bank of Canada (BoC) proved a success in the experimental phase, the Business Times reported in May.

Responding to the ever-growing use of cryptocurrencies in speeding up cross-border and cross-currency payments systems, the two central banks looked to bypass the cumbersome and costly correspondent banking network to link up their own domestic payments projects.

Although built on two different blockchain platforms, MAS and BoC collaborated to use CBDCs to make the process “faster, cheaper and safer”.

Thailand’s Project Inthanon

The Bank of Thailand is also in the experimental phase of a CBDC project called Inthanon, which launched in August last year to develop a decentralized real-time gross settlement (RTGS) system using tokenized central bank-issued debt instruments on a distributed ledger.

Results of its second phase of development to bring “regulatory compliance and data reconciliation functionalities into the payment process on a distributed ledger” were successful and the central bank is to soon push ahead with a RTGS prototype that will fully support cross-border funds transfer transactions.

Sweden’s E-Krona and Swiss E-Franc

Sweden’s Riksbank project dates back as far as the first quarter of 2017. After years of declining cash use, the central bank considered an e-krona would be a digital complement to cash, helping circulation and “guaranteeing the value of money”.

On its website, the Riksbank said it is “continuing to investigate the possibilities for issuing an e-krona to increase competence and in this way be better prepared to meet a new digital payment market”.

While the Swiss National Bank said back in April 2018 it was not interested in developing a CBDC, in May that year it proposed the launch of a study researching into the risks and benefits of such a project.

Now there’s a clamour for such an offering. The Swiss stock exchange has been in talks with the SNB about the possibility of a CBDC to help settle the cash side of trades, while Avenir Suisse, one of the country’s most prominent business think tanks, has called on the SNB to launch its own cryptocurrency, according to two stories by Swissinfo.ch.

Venezuela’s Petro and Uruguay’s E-Peso

Venezuela’s project to issue an oil-backed cryptocurrency to help it circumvent US sanctions and the collapse of its bolivar national currency under the weight of hyperinflation hasn’t been an immediate success.

The Petro, President Maduro claimed, would allow the country to access new forms of international financing. More than a year on from launch, the Petro is not traded on any international crpytocurrency exchanges, and the government has had to introduce punitive measures to get citizens to adopt the digital currency.

Uruguay’s attempts were less successful as the central bank launched a pilot CBDC programme in November 2017 to issue and circulate an e-peso. Twenty million e-pesos were issued, all of which were cancelled when the pilot ended. No further news on additional trials has been forthcoming.

Iran

Iran announced in July that it was planning to launch its own CBDC to be mined through an agreement between the Central Bank of Iran and a consortium of domestic private IT firms. Like Venezuela, Iran has huge mineral reserves that it will use to back its cryptocurrency and – it hopes – alleviate the financial pressure of international sanctions.