Do people want central bank digital currencies, better known as CBDCs? Countries that have experimented with or launched digital versions of their respective currencies have witnessed little fanfare for these endeavors. Put simply, they are not appealing to the general public. Yet governments are still foisting them onto their populations, perhaps because they might be the greatest surveillance tool known to man.
A Central Bank Digital Currency in Paradise
At the onset of the coronavirus pandemic, the Bahamas became the first nation in the world to issue a central bank digital currency. Whether it was out of fear that touching physical cash would result in COVID is unclear. But the Caribbean island made history nevertheless by unleashing the Sand Dollar digital currency. It maintains two forms: retail and wholesale. The former allows consumers to utilize the CBDC, while the latter is solely dedicated to financial institutions.
Suffice it to say, the world was and is still watching the ordeal unfold. Now, about four years after the Sand Dollar's introduction, it accounts for less than 1% of the money in circulation as acceptance and usage by businesses and consumers remain limited. Additionally, digital wallet values tumbled to $12 million in the first eight months of last year (the latest data), down from $49.8 million in the same period a year ago.
The government is ostensibly perturbed by this development, prompting officials to force commercial banks to distribute a central bank digital currency. Experts assert that there are two primary reasons why island dwellers reject a CBDC: There are few advantages over current payment methods, and the public is worried that this is the beginning of government spying.
Reportedly, policymakers in the Bahamas are indifferent to the general apprehension as they will not emulate other states that have offered financial incentives to use a CBDC or implement an interest rate on digital wallets. Whatever the case, the Bahamas is not the only place to experience consternation surrounding government-run digital currencies.
The Public Shuns CBDCs
China became one of the world's largest economies to introduce a central bank digital currency, known as the digital yuan or e-CNY. It had been years in the making, and because the Asian powerhouse is a hyper-digital location, officials had high expectations and believed their communities would ebulliently embrace the e-CNY. Today, there is very little action in the world of CBDCs.
Between January 1 and the end of May, cumulative transaction volume was fewer than $1 billion. While this is up significantly from the same five-month span last year, it pales compared to the nearly $1 trillion traded in the yuan each year in China. Although it is still technically in the pilot phase, the CBDC project has expanded to 26 regions nationwide. Over the years, officials have employed various measures to bolster adoption, from handing out free money for shopping to forcing businesses to accept digital yuan payments.
Yet, according to a paper published in the Cornell SC Johnson College of Business, "China’s e-CNY low usage rate is not just a Western invention; even former Chinese central bankers have commented on the poor performance of the currency, outwardly stating their disappointment. Meanwhile, the Chinese government remains committed to their CBDC vision," the report stated.
India's CBDC – the digital rupee – has experienced a decline in usage. Transaction rates had been solid in the months following its launch, mainly because the country's banks had disbursed employee benefits in CBDC units. However, more consumers and merchants have shrugged off the authoritarian digital payment "innovation" throughout 2024.
Nigeria’s case of the eNaira has been well documented. The Central Bank of Nigeria and even the International Monetary Fund conceded that the African state's CBDC has been a failure. In its first year, "The take-up of the eNaira by households and merchants has been slow," the global organization noted. Nearly 99% of all eNaira wallets are not used. Frustrated by this trend, officials imposed restrictions on cash withdrawals and redesigned the currency, creating cash shortages and public demonstrations.
With growing pushback, central banks have modified their expectations. According to a 2023 Business of International Settlements survey, the number of central banks that are very likely to issue a retail or wholesale CBDC within three to six years has diminished significantly from the 2022 survey.
The State of CBDCs
The Atlantic Council maintains a CBDC tracker, which shows that 36 countries are in the pilot phase. Thirty are still in the development stage, and 44 are actively researching a central bank digital currency. Seventeen are inactive, while two have been canceled. What about the United States? The Federal Reserve insists that it is several years away from putting together a CBDC. Republican lawmakers have introduced legislation to put the kibosh on its creation. Former President Donald Trump and independent presidential candidate Robert F. Kennedy, Jr. pledge to ban the formation of a CBDC. The research has been limited, but data available on the subject, including from the Cato Institute, show that the American people do not want one. Considering the populace lacks trust in the government, the collective thumbs down might not be surprising.
