CBDC Progress Update – South Africa, Thailand, Brazil, and China each Take Steps Forward

In the near future central bank digital currencies (CBDC) will be the norm.  Once the first few major examples roll off-the-line, others will follow en masse.  While it is looking as though China will be the first to achieve this launch, there are other smaller nations preparing for this inevitability as well.

South Africa

Efforts towards establishing a CBDC in South Africa are officially underway.  Days ago, the South African Reserve Bank (SARB) announced that it ‘has embarked on a study to investigate the feasibility, desirability and appropriateness of a central bank digital a currency (CBDC)’.

While this is an intriguing first step, the bank has made it clear that this feasibility study is not a commitment to issue a CBDC, and that no final decision has been made.

Scheduled to run until 2022, the study is expected to look at how the issuance of a CBDC will affect the following points.

• Policy
• Regulations
• Security and risk management

Providing the above points can be satisfied, the bank envisions a future CBDC as ‘providing the best attributes of both cash and electronic payments’.

Thailand

While the South African Reserve Bank may have just entered into a feasibility study, The Bank of Thailand (BoT) has moved one step further in to the developmental phase.  This phase will see Giesecke+Devrient, a German tech outfit, take on the responsibility of building what the BoT is looking for.

According to recently released documentation, the BoT has allocated roughly $320,000 USD towards this stage of its endeavour.  Although this step may place Thailand ahead of other nations just now considering a CBDC, the nation is still years away from officially releasing a final product.  When its intentions were initially announced, the BoT indicated that it has placed a timeline of 3-5 years on the project.

Brazil

For months now Brazil’s reserve bank, Banco Central Do Brasil (BCB), has considered the issuance of a CBDC.  Now the bank has officially released a list of guidelines which must be adhered to in the event of an eventual launch.  The following are a few key points incorporated in its guideline.

• Ability to perform online operations and possibly offline operations
• Issuance by the BCB, as a n extension of the physical currency, with distribution to the public intermediated by custodians of the SFN and SPB.
• Not be interest-bearing
• Guarantee of legal certainty in its operations

Interestingly, the BCB notes that it will ‘need to deepen the discussion on the subject, including opening up a dialogue with the private sector’.  What isn’t clear is what form this dialogue will take – will the BCB tap in to existing custodial solutions? Incorporate existing code from already established currencies? Etc.

China

As the clear front-runner among large nations known to be developing its own CBDC, China’s central bank, The People’s Bank of China (PBOC), is reportedly moving on to its third live trial already.  While other nations are still assessing the need for a CBDC, China has determined them worthy of development and launch.

The upcoming trial will take place in the city of Beijing.  Previous trials took place in both Shenzhen, and Suzhou.

Like the first two, this most recent trial will be lottery based with 200,000 applicants/residents within Beijing winning roughly $31 USD each.  For those lucky winners, funds can then be spent at participating merchants through use of a mobile app.

Once the PBOC completes the necessary trials, it is expected that the finished product/CBDC will be known at the ‘e-CNY’.