CBDC Adoption in Africa and Caribbean is Slow. India Piloting CBDC Anyway

TechMonitor | Afiq Fitri and Greg Noone | Dec 5, 2022

CBDC adoption Africa and Caribbean - CBDC Adoption in Africa and Caribbean is Slow. India Piloting CBDC Anyway

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CBDCs are on the march

  • From China to the UAE, the Bahamas to Nigeria, countries around the world have started trialling the use of central bank digital currencies as a way to translate their national fiat currencies into a means of digital exchange.
    • One of the drivers of these state-backed digital currencies is the dramatic decline of physical cash usage which, according to McKinsey, has plunged by approximately one-third in Europe between 2014 and 2021.
    • As the popularity of physical money diminishes, central banks are eager to introduce CBDCs to reassert their roles as the anchors of capital.
  • Reserve Bank of India (RBI) to officially begin piloting its own CBDC, the e-rupee, last week. The product of two years of research by the central bank, the RBI explained in a concept note published in October that the project would ‘bolster India’s digital economy, enhance financial inclusion, and make the monetary and payment systems more efficient.’

See: 

According to CBDCTracker, these Central Banks have Launched a CBDC or Pilot Initiative as of Today

X-Border Payments: European Central Bank Report says CBDCs Could Be ‘Holy Grail’

  • Adoption with CBDCs low in Africa and Caribbean thus far:
    • an estimated 17% of Jamaicans and 18% of Bahamians remain unbanked. Even so, only 3.4% of the former's citizens have downloaded the Lynk app, while this figure is even lower for downloads of the DCash and the Sand Dollar.
    • In Jamaica, for example, on-boarding merchants has proven embarrassingly difficult, while at the start of the year, DCash went offline for two months after the certificate for the network which hosts the CBDC distributed ledger expired.
  • China's e-CNY is the only CBDC performing above expectations thus far:
    • Since launching in September 2021, transactions using the CBDC have surpassed $13.9bn, a success that some have attributed to its introduction into an economy where digital payments have almost eclipsed those using cash and where cryptocurrencies are vigorously suppressed.
    • Active promotion by the central government also hasn't hurt - a campaign outwardly premised on the role the digital yuan could play in reducing systemic risk in the national payments system
    • Some have speculated, on the fact that it provides another opportunity for the state to peer into private individual transactions.
  • Crypto is booming in India despite 30% tax on oncime
    • Indian government has attempted to use all the powers at its disposal to crush crypto, imposing a 30% tax on income derived from trading cryptocurrencies (an outright legal ban was quashed by the Supreme Court in 2018.) Despite this, India remains a global leader in cryptocurrency adoption, ranking fourth globally according to Chainalysis and trading some $172bn of BTC, ETH and other coins in the year leading up to June 2022.

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