National digital currencies
Financial authorities in a range of countries have already appreciated the benefits of digital currency. This is the speed and security of transactions, the ability to make micropayments and simple accounting of all transactions with money. Digital currency can be used to reduce government debt, avoid sanctions, reduce losses from currency conversion in international trade. Payments in digital currency will help reduce corruption, as transactions are completely transparent. At the same time, the costs of operations with banknotes and coins are increasing. These are the conditions for the birth of a new e-currency, which will be issued and put into circulation under state control. The national crypto does not necessarily have to be based on a blockchain. There are other technical solutions for monetary settlements such as DAG (directed acyclic graph).
China has advanced in the creation of the national currency based on a blockchain. China’s central bank digital currency (CBDC) is called DCEP (Digital Currency Electronic Payment) and it relies on the state infrastructure network BSN (Blockchain Service Network).
It is predicted that digital yuan payments may compete with WeChat and AliPay soon. McDonald’s and Starbucks representatives in China were among the first to test DCEP acceptance. Implementation of the project is supported by the four largest commercial banks in China, as well as leading telecom and mobile operators: including China Telecom, China Mobile, China Unicom. Chinese smartphone manufacturer Huawei has already announced support for national digital currency in its new phone models. In 2021, digital yuan will have to take all outlets in the country.
Will Europe be next?
President of European Central Bank (ECB), Christine Lagarde, is actively promoting the digital euro project. Currently, opinion polls are conducted in European countries — whether EU citizens are ready to accept digital currency, which has the same circulation as fiat cash banknotes and euro coins. For experiments with the digital currency of the EU, the French Central Bank has chosen the Tezos cryptocurrency blockchain. Digital krona (e-krona) in Sweden has received significant development. The Royal Bank of Sweden (Riksbank) is testing its version of the CBDC, which is a centralized digital asset. It will be possible to make payments with e-krona from mobile devices and bank cards.
What about other countries?
At the same time, the US government and management are careful about digital currencies national crypto projects. In their opinion, the virtual currency is too expensive and not effective. Despite the technological leadership of the United States and the high level of development of the fintech, electronic currency, issued by the federal reserve, is a matter of the distant future.
The national digital currency has been successfully implemented in Tunisia. Issued by the Central Bank of the country “E-Dinar” is used to pay bills and taxes, payments for goods and services.
The Marshall Islands also became an example of successful implementation of the national digital currency. An interesting approach of the central bank of this small country is that the digital asset with the name SOV has become an addition to the US dollar.
The countries of Western Africa are actively implementing eCFA. This digital currency will be used by residents of Benin, Mali, Burkina Faso, Niger, Togo, Guinea-Bissau, and the Ivory Coast.
In Singapore, UK, Japan, and Switzerland, the feasibility of issuing national crypto is still under study.
National crypto is not always implemented successfully
There are some unsuccessful and abandoned undertakings among state cryptocurrency projects, as well as those that never left the testing stage.
Venezuelan Petro was announced in 2017 and appeared in circulation in 2018. Since then, its implementation has not been successful — in the test mode it is used by some stores and the local state airline.
In Ecuador, the experiment to implement digital currency was found to be unsuccessful and rolled back in 2017.
Testing of e-Peso in Uruguay was limited to an audience of 10,000 mobile users and several dozen businesses.
In Dubai, since 2017 they have been testing the emCash payment system, which was to become the state digital currency of the emirate.
For a long time, nothing has been heard about the Ukrainian developments of digital hryvnia, announced in 2018.
Tested in Russia, the system of fast payments (SBP) based on the “cryptoruble” has not received further development since 2019.
Despite current difficulties with development and implementation, the state cryptocurrencies and digital currencies issued by central banks (CBDC) will become extremely important in this decade. Digital currencies and blockchains have become a factor of big politics. A country that was the first one to fully implement digital currency in its payments will have an important technological advantage. For this reason, the comparative study of cryptographic algorithms has become interesting not only for geeks, but also for heads of state, heads of central banks, and intelligence agencies.
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Originally published at https://simpleswap.io on December 10, 2020.