The global race towards introduction adopting a Central Bank Digital Currency (‘CBDC’) is instilled with competition. Recently, Japan announced that it shall be considering the introduction of an official CBDC in the official Honebuto Plan for Economic and Fiscal Development. Japan has been coordinating with the European Central bank (‘ECB’) and other nations’ central banks for research and development of a CBDC. Japan has always been ahead in the crypto asset’s jurisprudence. Japan was also one of the first nations to define ‘cryptocurrencies’ within their laws. With China already underway with Digital Yuan, Japan aims to get ahead with the Digital Yen development and introduction in markets as reports suggest that Digital Yuan is already being tested in civilian markets and even some multinationals within China. The Bank of Japan (‘BOJ’) has also announced that the Government shall be including the CBDC in the financial and economic plans this year, making the introduction of the CBDC advancing more than just the policy building stage. BOJ stated that they shall be piloting the technical aspects of the CBDC in consultation with global institutions including within the US and Europe. The six central banks that Japan is coordinating with are:
a) Bank of Canada;
b) Bank of Japan;
c) Bank of England;
d) ECB;
e) Sveriges Riksbank in Sweden; and
f) Bank of International Settlements.
Japan shall also be exploring use cases with these working groups to experiment with different scenarios in which the CBDC can be implemented.
China has been grasping a lot of attention with the near introduction of its digital Yuan. However, China is not in the race alone. Countries such as Sweden have also begun their pilot projects and major economies such as the US are on the discussion stage for their Digital Dollar project. Japan has also asked for support from the US Federal Reserve to get ahead of China in the introduction of CBDC. Given the current tensions against China, more support may be aligned with countries like Japan and Sweden when it comes to the actual practical implementation of a CBDC.
Other than just the planning of the introduction of CBDC, nations have been experimenting with blockchain-based payments platforms to facilitate an international settlement and payment mechanism. Singapore recently announced the completion of Project Ubin. Moreover, Bank of Lithuania (‘BOL’) has also launched the first-ever central bank produced digital collectors coin, LBCOINS. BOL’s step has been made towards the testing of CBDC and is entering the final stage of the trial period, initially started in March 2018. The blockchain-based LBCOIN is set to be released on July 23, 2020. The BOL has decided to issue 4,000 LBCOINs.
However, coming back to the home jurisdiction of India, it can be said that the Indian regulators have not given blockchain-based payments network the competitive importance that it requires. The Reserve Bank of India (‘RBI’) has been developing guidelines for digital banking platforms, however, has not paid emphasis on blockchain and decentralized ledger technology (‘DLT’) networks. With most nations on the policy stage and some on the pilot stage, India may lack behind when it comes to full digitization of payments. The current air of legislations in India with regards to cryptocurrencies is extremely uncertain, and the first step would be classifying the legality of cryptocurrencies before we move ahead with the implementation of any CBDC.
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