Category: Banking

The Zambian central bank has revealed that it is in the process of researching central bank digital currencies (CBDCs), and plans to implement them by the end of the fourth quarter if the outcomes look positive. This comes after the government of the landlocked East African republic issued warnings about cryptocurrencies earlier in the year.

According to a Bloomberg report, Zambia has joined the growing list of countries researching CBDCs with the joint aim of cutting transaction costs and increasing citizens’ participation in the formal financial system, as well as providing a major upgrade to traceability.

Jamaica is planning to roll out a CBDC in early 2022, and even Australia’s indigenous Sovereign Yidindji Nation in the rainforests of far north Queensland has digitised its own currency.

CBDCs Making Headway

In a recent speech by Kristalina Georgieva, managing director of the International Monetary Fund (IMF), there are about 100 countries currently in some phase of exploring CBDCs, be it research, testing, or distribution.

We have moved beyond conceptual discussions of CBDCs and we are now in the phase of experimentation. Central banks are rolling up their sleeves and familiarising themselves with the bits and bytes of digital money.

Kristalina Georgieva, managing director, IMF

Georgieva added that if CBDCs are well designed, they could offer “more resilience, more safety, greater availability, and lower costs than private forms of digital money”.

Governments Want CBDCs, Not Crypto

According to Bloomberg, earlier this month the Zambian central bank made it clear that cryptocurrencies are not legal tender and should be used “at your own risk”.

Many countries are planning on replacing fiat money with CBDCs due to the advantages they bring to enforce monetary policy. With the advent of digital currency, many more people will be able to participate in the financial system. However, in third world countries, many people don’t have access to devices or the internet, which makes the use case more difficult.

One of the other driving factors is that people are now able to use more methods of payment and currencies than ever before. If the citizens of a country start preferring another currency to their own, it could have negative effects on that native currency.

The first phase of South Korea’s CBDC (Central Bank Digital Currency) trial has been successfully completed, as per an announcement from the Bank of Korea.

Following the issuance and distribution pilot, June 2022 is the potential date to start working with financial institutions to publicly distribute the digital won. One of these financial entities is Ground X – a subsidiary of Korea’s largest social network, Kakao – selected as the bank’s technology partner for the digital won simulations.

A simulation environment [will be] created in the cloud for the basic functions of the implemented CBDC (manufacturing, issuance, distribution, etc). Based on this, we plan to verify the possibility of implementing various additional functions (offline payments, etc) and applying new technologies, such as enhancing personal information protection.

Bank of Korea report

The bank emphasised that the digital won would not replace its fiat currency, rather it will be used as a “backup payment method” in situations where telecommunication companies experience failure.

Travel Rule Puts Pressure on Crypto Exchanges

South Korea has become the 14th nation to officially and successfully complete a CBDC pilot, following China, the Bahamas and Nigeria, to name a few.

The CBDC announcement comes after many South Korean financial entities have placed a lot of pressure on crypto exchanges following the Travel Rule, which requires exchanges, digital wallet providers and other crypto-related companies to share personally identifiable information (PII) for transactions over a certain amount.

On January 25, South Korea’s second-biggest exchange, Bithumb, had to suspend crypto withdrawals following pressure from the Korean Financial Intelligence Unit.

An odd sidelight to all this is that, as Crypto News Australia reported earlier this month, South Korean presidential candidate Lee Jae-Myung is using non-fungible tokens (NFTs) as part of his fundraising campaign.

The Bank of Jamaica (BOJ) has recently completed its Central Bank Digital Currency (CBDC) pilot with eCurrency Mint. The project will be rolled out in the first quarter of 2022 with the onboarding of more users and two extra wallet providers.

Another Nation Opts For a CBDC

Jamaica has joined the Bahamas and Ukraine and a handful of other countries that are implementing a CBDC into their monetary system.

According to a release from the Jamaica Information Service, the BOJ concluded its CBDC pilot on December 31.

As part of the pilot, the BOJ minted 230 million Jamaican dollars (JMD), or about US$1.5 million, for 57 customers by way of person-to person, cash-in and cash-out transactions through 37 accounts. This was all done at an event sponsored by the National Commercial Bank (NCB), one of the ​​island nation’s largest financial institutions.

For the pilot, BOJ used Irish cryptography security firm eCurrency Mint as the provider for its digital currency project after opening applications in July 2020. The scope of the pilot was limited to digital wallet providers who indicated readiness to participate within the timeframe.

National Rollout Ready to Go

As the roll-out commences, NCB will continue to bring on new customers, as well as add two other wallet providers who are currently in the virtual simulation testing phase.

As countries find more use cases for CBDCs this may turn out to be the year of central bank issued digital currency, with both Brazil and Peru potentially looking to introduce CBDCs in 2022.