Central banks worldwide are actively exploring central bank digital currencies (CBDCs) to improve monetary policies and reduce the costs associated with physical cash. Despite this interest, the everyday use of CBDCs by citizens remains limited.
India, known for its success in digital payments through UPI, launched a Digital Rupee pilot in December 2022. By early 2024, the pilot had attracted 1.3 million users and over 300,000 merchants. The program uses a token-based offline system and seamlessly integrates with existing digital infrastructure like UPI and Aadhaar.
Aishwary Gupta, Global Head of Payments at Polygon Labs, shared insights on global CBDC experiments. He mentioned that over 130 countries, representing 98% of global GDP, are exploring CBDCs. However, the adoption rates vary, with examples like China’s e-CNY having many wallets but limited daily use, and Nigeria’s eNaira facing challenges due to trust issues.
Gupta emphasized that India’s success is a result of its robust digital infrastructure and collaboration between the public and private sectors. He believes that CBDCs should focus on addressing real-world issues like financial inclusion and remittances while maintaining privacy to gain public trust.
There is a growing debate over the balance between control and privacy in the implementation of CBDCs. While central banks claim that CBDCs are meant to complement cash, critics express concerns about increased government control over monetary systems. As the world shifts towards decentralized technologies, discussions on privacy, surveillance, and financial freedom in a CBDC-driven economy intensify.
The global experiment with CBDCs is still in its early phases, but discussions on trust, privacy, and the future role of central banks in a digital economy are becoming more prominent.
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