Signal Radar: Is widespread adoption of Central Bank Digital Currencies (CBDCs) just around the corner?

This year has seen an acceleration in research, pilots and exploration of CBDCs in different jurisdictions across the globe.

– This signal forms part of Hunch | Strategic Innovation Pathfinder, our proprietary cross-sector database examining changes in customer behaviour and expectations that have the potential to grow in scale and impact. –

China's government has pressed ahead with its plans for the ‘digital yuan’. Large-scale tests have been launched at major banks, including $1.5 million worth of digital yuan being used in a pilot in Shenzhen, and more than 6,700 use cases for the digital currency being evaluated.

In October, the Bahamas became the first country to launch a nationwide CBDC. The ‘sand dollar’  can be used for all wholesale and retail transactions domestically. It is available 24/7/365 including in disconnected setting and has very low transaction fees.

The Bank of Japan will launch a ‘digital yen’ pilot in early 2021. Lebanon’s central bank governor has announced the country is preparing to launch a digital currency in 2021. CBDC projects are underway in a raft of other countries including Brazil, Thailand and Cambodia.

The UK Treasury Department and Bank of England are actively researching the possibility of using CBDC in the UK as an alternative to cash, though have not announced any planned pilots

The race to develop CBDCs is also highlighting new international areas of tension. US intelligence is looking at Chinese CBDC as a potential national security threat as a successful digital yuan could challenge the status of the dollar in international trade. It could also provide Beijing with a new method of surveillance.

Will CBDC adoption only further highlight a shift in geopolitical power Eastwards?

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