CBDC pioneers: Which countries are currently testing a retail central bank digital currency?

Authors: Jonas Weisbrodt, Jonas Gross

Please find an updated analysis here (July 2021).

Central bank digital currencies (CBDC) are currently a hot topic. A study by the Bank for International Settlements (BIS) from January 2020 shows that 80% of worldwide central banks are engaged in CBDC-related research (Boar et al. 2020, p. 3). The percentage of central banks that run experiments or proofs-of-concept is also growing, reaching almost 50%. 10% of the surveyed central banks plan to introduce a generally available (retail) CBDC in the next three years and 20% in the next six years (ibid., p. 7). Therefore, CBDC efforts are very dynamic and are expected to even increase in momentum within the next few years.

This article discusses current CBDC initiatives and explains the motives and the progress of these projects. Our analysis shows that China, Sweden, the Bahamas, the Eastern Caribbean Currency Union, and the Marshall Islands can currently be seen as pioneers in the CBDC space. Note that this article does not focus on the definition and the design principles of a CBDC. If you are interested in details about these aspects, please see Klein, Gross, and Sandner (2020).

Retail CBDC projects in practice

China: DC/EP

China’s central bank (PBoC) was one of the first central banks focussing on the development of a CBDC, forming a special task force already in 2014. In April 2020, the project gained traction as the testing of a CBDC prototype was announced. Currently, the prototype of the Chinese CBDC, called DC/EP (digital currency/electronic payment), is tested by the private and also by the public sector. 50% of the mobility subsidies for employees in the public sector are being paid out directly onto the digital DC/EP wallet. Further testing was announced to take place during the Winter Olympics in 2022.

The role of cash in China is declining. In 2016, only 40% of all payments were carried out with cash (Statista 2019) — in 2018, only 20% (Bundesbank 2019). In the Euro area, this share amounts to 79% (Esselink, Hernández 2017, p. 4). China is consequently one of the few countries worldwide…