Central Bank Digital Currencies (CBDCs) are picking up global momentum.

The Bank of England and HM Treasury announced Monday the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC. Slowly, but steadily, more and more central banks and governments across the globe are waking up to the potential of CBDCs.

Morgan Stanley

Analysts at Morgan Stanley (NYSE: MS) believe that CBDCs are different from cryptocurrencies because they are unlikely to use blockchains. It is the analysts’ view that both cryptocurrencies and CBDCs can coexist because they would serve different use cases.

While cryptos could function as a store of value or a speculative asset, CBDCs would continue to function like fiat currencies.

Pakistan mulling a CBDC

“We are studying it (introduction of a digital currency by the central bank) very carefully,” State Bank of Pakistan (SBP) Governor Reza Baqir said in a recent interview with the international media outlet CNN.

“The benefit of that is twofold; not only that will give another boost to our efforts for financial inclusion, but also because it’s a central bank-issued digital currency, it will allow us to make further progress in our fight against money laundering and terrorism financing,” he said.

China’s digital yuan and the US dollar

Much has been made of the potential use of the digital yuan (China’s homegrown CBDC) as a secret weapon that would undermine the status of the US dollar as the global reserve currency.

However, Kazushige Kamiyama, head of the Bank of Japan’s payment systems department, feels these fears are unfounded.

“The dollar’s status as the key global currency won’t change so easily,” he said. “In fact, the dollar’s advantage may strengthen further if the U.S. goes with digitalization.”

Kamiyama is also the person tasked with looking into a virtual Japanese currency.

It may be noted that the People’s Bank of China could well become the first major global central bank to launch a digital currency.

The PBoC has already conducted numerous trials for businesses and consumers across China in cities including Suzhou, Shenzhen, Chengdu, and Xiong’an.

The digital yuan may debut at the Winter Olympics

According to CNN, which quoted Li Bo, a deputy governor of the People’s Bank of China, China’s pilots for its digital currency were making good progress after launching in various Chinese cities and at the proposed venues for the Winter Olympics.

The scope of the digital yuan tests has now been extended to over 10 cities and provinces covering 100 million people.

The authorities may allow foreign athletes and visitors to use the native Chinese digital currency at the 2022 Beijing Winter Olympics.

Li went so far as to say that the primary focus of the digital yuan would be in the domestic economy rather than undercutting the US dollar.

“For the internationalization of the renminbi, we have said many times that it’s a natural process, and our goal is not to replace US dollar or any other international currency,” Li told attendees at a business conference held in China’s Hainan province. “Our goal is to allow the market to choose.”

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