A national digital currency (CBDC) is a currency designed and managed by the government of a single nation. At the same time, it does not position itself as a replacement for the existing fiat system. At least today, not a single state has switched to using exclusively cryptocurrencies. However, the technology gives citizens the ability to use crypto as an alternative to fiat currency when paying for goods and services.
The first thing to understand is that digital currency and cryptocurrency are two different things. While the latter is based on a decentralized system, the digital currency operates without decentralization using existing financial database technology.
The number of countries that have already introduced cryptocurrencies into the public financial system is very small, but over time their number can grow significantly.
1. Venezuela: Petro
Venezuelan cryptocurrency, Petro, is probably one of the most popular national digital currencies. The announcement of Petro in 2017 was not just symbolic, the development should have positioned itself as an alternative to the Venezuelan bolivar supported by oil, gold and diamond reserves in the country.
Critics are skeptical of Petro, because despite the statements of the Venezuelan government that the price of the Petro token will be pegged to oil prices, this option is not spelled out in the cryptocurrency code.
Despite a lot of publicity, to date, Petro has failed to gain demand both inside and outside the country. But this does not mean that Venezuelans do not know about cryptocurrencies. Venezuela is among the world's largest users of Bitcoin, Bitcoin Cash and other cryptocurrencies. As the nation's fiat currency is terribly volatile and essentially worthless, and the country is subject to intense international sanctions, Venezuelans are turning to cryptocurrencies to survive the growing crisis.
2. Dubai, UAE: emCash
In 2017, Dubai announced the launch of a cryptocurrency known as emCash. To create it, the Dubai Economic Development Department has partnered with Pundi X and the British company Object Tech Grp Ltd.
Unfortunately, to date, there is practically no news on emCash, although the Dubai authorities claim that the project is still alive.
3. Marshall Islands: SOV
Despite the tiny size of the state, citizens of the Marshall Islands already have the ability to pay in the national cryptocurrency, known as SOV or Sovereign
SOV was introduced as a national digital currency back in 2018. Merchants still accept paper US dollar bills as payment, but the SOV cryptocurrency is also official legal tender.
The issuance of SOV will be 24 million tokens, which will help protect the cryptocurrency from inflation, while the government continues to work towards the development of the initiative.
4. Tunisia: E-Dinar
In 2015, a rumor swept through the crypto space that the Tunisian government was working on creating a central bank digital currency known as the electronic dinar. So, at the end of 2019, information appeared about the creation of a CBDC, implying that e-Dinar, based on the blockchain, is alive. However, the Tunisian government denied the data.
The existing e-Dinar platform continues to provide digital payment services to Tunisian citizens, but it currently does not run on blockchain.
5. Senegal: eCFA
Senegal's national digital currency, eCFA, is linked to the Senate's federal currency, the CFA franc, and is a fully centralized digital currency.
eCFA is used throughout West Africa. The West African Economic and Monetary Union plans to launch eCFA in Benin, Mali, Burkina Faso, Niger, Togo, Guinea-Bissau and Ivory Coast. In addition, eCFA interoperates with existing digital money platforms such as MPesa, the Kenyan digital currency widely used from northwest Africa to South Africa.
eCFA uses distributed ledger technology to assist the government in tracking digital transactions. It is not a blockchain, the system is only partially decentralized, but the introduction of an easy-to-use digital currency is groundbreaking for millions of unbanked citizens of West Africa.
6. China: digital yuan
While the Chinese government does not intend to introduce a decentralized cryptocurrency that uses blockchain technology, China will introduce a CBDC pegged to the yuan. Decentralization does not fit with the current operating model of the Chinese government, while a centralized digital currency is much easier to track, maintain, and control.
As for the national currency, the version of the yuan hosted by the central bank will appear before the decentralized cryptocurrency supply soon. According to the latest information, the development is now at the testing stage.
To date, dozens of countries are considering the possibility of creating a CBDC. The authorities of Uruguay, Estonia, Japan, Ecuador, Iran, South Korea, Singapore, India, Germany, Thailand, Israel, Canada, Palestine, Norway, Sweden, Hong Kong, Switzerland, Russia and the UK have already made statements of interest in national cryptocurrencies or CBDC.