Republican Working Group Proposes CBDC Guiding Principles while BoE Begins Exploratory Process

The exploration of Central Bank Digital Currencies by world governments continues to pick up steam.  The following are a few examples of this from the past week.

eNaira Adoption

Less than a month after launch, the Central Bank of Nigeria (CBN) has seen promising adoption of its CBDC dubbed the ‘eNaira’.  Recent reports indicate that nearly half a million consumers have already downloaded the assets associated wallet.

In a recent conversation with Bloomberg, Osita Nwanisobi of the CBN stated,

“More than 488,000 people have downloaded the consumer wallet – that’s needed to transact eNaira – while about 78,000 merchants from more than 160 countries have enrolled.”

With this quick uptake, the public has clearly spoken, indicating both a need and desire for digital assets and what they have to offer.

Principles of a CBDC

Various members of the Republican Party have just released a proposal for evaluating potential CBDCs.  In it, it is proposed that a potential U.S. CBDC must meet the following parameters.

1. Must maintain the dollar as the world’s reserve currency and the pre-eminence of the U.S. payment system.
2. Must not impede ongoing development of stablecoins.
3. Must promote innovation within the private sector while fostering competition.
4. Must address both privacy and security protections.

The working group responsible for drafting the proposal states,

“As we consider how issuing a U.S. Central Bank Digital Currency may fit into this 21st century landscape, it is critical that lawmakers fully understand both the potential costs and benefits. That is why Financial Services Committee Republicans have crafted principles to ensure the discussion is focused on whether a Fed-issued digital currency addresses a problem, rather than creating one.”

Multi-Year Exploration in the United Kingdom

While politicians in the U.S. work towards developing the guiding principles behind a CBDC, the United Kingdom has joined the fray.  Days ago, the Bank of England and HM Treasury announced a joint effort towards the potential launch of its own CBDC.

The duo, which was clear that any CBDC issued would ‘exist alongside cash and bank deposits, rather than replacing them’, indicated that the process would begin in 2022 and take place over several years.  Based on this timeline, the Bank of England has stated that if given the greenlight, ‘the earliest date for launch of a UK CBDC would be in the second half of the decade’.

Jon Cunliffe, Deputy Governor for Financial Stability, commented on this process, stating,

“The plan to publish a consultation next year on CBDC is a crucial step in our policy development, especially as we further our thinking on the pressing issues at hand. What it will do is provide a platform for interested parties and relevant groups to engage with the key questions on the merits of CBDC, and whether the public sector should advance to a development phase.”