In an effort to shadow the emergence of cryptocurrency and thus strengthen control over their economies, several states around the world are working to develop central bank digital currencies (CBDCs). Some states like Nigeria have already launched their digital currencies. Other states are considering abandoning their CBDC project, which they do not find promising. The central banks of these states provide different information to justify this reversal. A look at four countries that have put an end to their CBDC development ambitions.
Ecuador, a CBDC based on a foreign currency
In 2014, the Banco Central del Ecuador (BCE) officially announced the development of its own digital currency. Known as Dinero Electrónico (DE), this CBDC aimed to increase financial inclusion and reduce the need for the central bank to hold and distribute large amounts of fiat currency.
In February 2015, Ecuador adopted its CBDC as a functional means of payment. This allowed users to open an account and conduct financial transactions easily. According to some sources, Ecuador’s CBDC gathered nearly 500,000 users between 2014 and 2018.
Successful CBDC you say? There was one important caveat. Ecuador’s CBDC was based on the U.S. dollar, not the country’s currency.
In March 2018, the Banco Central del Ecuador (BCE) finally deactivated its CBDC. Furthermore, Ecuador is apparently still skeptical of the whole CBDC phenomenon.
In August 2022, Andrés Arauz, the former general manager of Ecuador’s central bank, publicly disavowed the digital Euro.
For him, this CBDC could disrupt not only privacy but also democracy in the Eurozone.
The words of an IMF official who says that the CBDC is a powerful tool for controlling citizens prove that Andrés Arauz was not wrong at all.
Japan, a CBDC is a risk to financial stability
In October 2020, the Japanese central bank released its initial report on the development of CBDC.
In early 2021, the banking institution began testing its CBDC with plans to complete the pilot phase in March 2022.
However, even before the CBDC trial was completed, the project was met with skepticism, including within the central bank. Indeed, the former head of the BOJ, Hiromi Yamaoka, advised against using CBDC last January.
He said the central bank’s digital currency posed risks to the country’s financial stability. In July 2022, the bank issued a report stating that it did not intend to issue a CBDC.
Denmark, a CBDC does not improve the financial infrastructure
Denmark was one of the first countries to explore the possibility of issuing a CBDC. In 2016, Danmarks Nationalbank began work on digitizing the national currency.
After experiments, the Danish central bank released a report rejecting the idea of launching a CBDC.
In a country with a very efficient payment infrastructure, Danmarks Nationalbank felt that CBDC would do little to improve the country’s financial infrastructure. In addition, the Danish central bank had concerns that CBDC would disrupt the private sector.
It is not clear how CBDCs will create significant added value over existing solutions in Denmark.Danmarks Nationalbank
Finland, CBDC too expensive compared to debit cards
In 2020, Finland’s central bank published the lessons learned from the world’s first CBDC.
This report provided a description of its smart card system that it created in the 1990s. The Bank of Finland believes that this card can be considered the world’s first CBDC.
In 2006, the Central Bank of Finland finally abandoned the smart card. It had become more expensive than simple debit cards, according to the Bank of Finland.
While it has abandoned the CBDC project in its country, Finland seems to favor a digital Euro.
In August 2022, the Governor of the Bank of Finland, Olli Rehn, indicated that a digital euro could facilitate cross-border payments in Europe.
As Edward Snowden says, the central bank’s digital currency is a kind of crypto perversion. It could easily be used by autocratic regimes to tighten control over citizens and silence dissenting voices. Being endorsed to a national currency exposed to inflation, CBDC also does not protect citizens’ finances from losing value. The states that are pausing their CBDC project are probably being prescient. They should be joined in the future by others.
I dream of a world where every citizen has total control over themselves, including their finances. I believe that Bitcoin is one of the tools that will achieve this revolution. Since 2019, I am learning about this cryptocurrency and spreading the word around.