Nigeria and China are ahead of the UK in the race for digital money

Saturday 09 April 2022 07h55

As countries around the world step up CBDC efforts, lawmakers are divided on the risks posed by new digital currencies.

A new index indicating the readiness and adoption of central bank digital currencies (CBDCs) has placed Nigeria at the top of the rankings with the e-Naira, launched in October 2021.

Nigeria’s lead is being closely followed by other CBDC early adopters, the Bahamas, Mainland China, Jamaica and the Eastern Caribbean.

The results, taken from the PwC Global CBDC Index, reflect the progress and position of central banks on the development of CBDCs, in a retail and wholesale context.

In the UK, the Bank of England and the UK Treasury will consult with industry later in the summer to set out the assessment of the case for a possible UK CBDC, including the merits of further work.

However, the House of Lords Economic Affairs Committee recently said that CBDCs are “a solution in search of a problem”.

Cash decrease

Interest in digital currencies follows the fall in cash payments.

In the UK, the Bank of England has reported a dramatic decline in recent years, with just 17% of all payments in 2020 being made in banknotes. This figure was down from more than 50% of payments in 2010.

Many central banks have also been dragged down by the rise of private sector crypto-assets, which the Bank of England and the Financial Stability Board recently labeled as a potential systemic risk.

Stable Coins

PwC’s analysis also provides insight into stablecoins, crypto-assets issued by individuals that aim to maintain stable value by pegging to fiat currency or other assets.

According to PwC’s Stablecoin Overview, four key characteristics can be used to determine a coin’s future utility. Namely, the level of regulatory oversight and records, the strength of evidence confirming the existence of the underlying assets backing the stablecoin, the nature of reserve assets, and the underlying technology used.

Haydn Jones, UK blockchain and crypto specialist at PwC UK, told City AM this morning: “Globally the appetite is strong with over 80% of central banks considering a CBDC.”

“Nigeria is leading the way with countries like the Bahamas, China and Jamaica with currencies already alive or nearly alive and many more expected to follow in the coming years.”

Jones added: “Here in the UK, steps are being taken to look at how we could adopt CBDCs, with the Bank and Treasury looking carefully at potential design and development.”

“Digital currencies could prove to be a huge boost, opening vast new markets and creating sources of business that could last for decades. As CBDC adoption looks poised to become the new global normal , it is essential that the UK continues to ensure that we remain forward-looking and attentive to change, no matter what,” Jones concluded.