The financial and monetary system is transitioning into contactless payment options and digital currencies. About 90 percent of the world's central banks are engaged in CBDC research, proof of concept, pilot, development, and launch, while the remaining are overlooking CBDC offerings. Notwithstanding, many central banks have cancelled their CBDC following their launch. While learning from the past failure is extoled as a virtue, learning from failed CBDC is seldom in the CBDC ecosystem, contrary to dominant literature on CBDC development and scalability. This study explores reasons why central banks discontinued already launched CBDC's. The authors adopted criterion sampling to select failed CBDC. This multiple case content analysis shows that low levels of trust, cybersecurity concerns, inadequate digital identification infrastructure, and obsolete and uncompetitive technology are the leading triggers of failed CBDC. Through the lens of actor-network theory (ANT), actors contributing to CBDC failure was identified
TopIntroduction
CBDC stands for central bank digital currency. It is a digital version of a country's fiat currency, issued and backed by the central bank of that country. CBDCs can be used for digital transactions in the same way that physical cash is used for transactions in the real world. They are typically designed to be used by consumers and businesses for everyday transactions and can be stored and exchanged electronically. There are several advantages of CBDCs that are considered important for the development and use of digital currencies in future. CBDCs can make it easier for people who are currently unbanked or underbanked, such as those living in rural areas or those without access to traditional banking services, to participate in the digital economy. CBDCs can improve the speed and efficiency of digital payments, as they can be exchanged and processed quickly and securely. CBDCs can increase the stability of the financial system by reducing the risk of bank runs. CBDCs can give central banks more control over monetary policy by allowing them to conduct transactions directly with commercial banks and other market participants. CBDCs can reduce the risk of fraud and money laundering by providing secure and traceable digital transactions. CBDCs can improve cross-border payments by providing a digital currency that is widely accepted and easily transferable. CBDCs can provide a secure and efficient means of digital transactions that is under the control of the central bank and the government rather than the private sector, strengthening the country's digital sovereignty.
It's worth noting that the benefits of CBDCs will depend on their design and how they are implemented. Despite of many advantages, developing and implementing a CBDC can be a complex and technically challenging process. Legal and regulatory issues also raise pertinent questions by privacy and anti-money laundering programs about the transparency and oversight. Mass adoption of CBDCs will require a robust infrastructure, user-friendly interfaces, and a reliable network of merchants and service providers that accept CBDCs. If not designed properly, CBDCs could also lead to financial exclusion for certain groups of people, particularly those who are not able or willing to use digital platforms for transactions. According to CBDC Tracker1, ten of the global central banks have launched pilot versions of digital currencies during 2020-22, for example, People’s Bank of China launched a pilot program for its digital Yuan in four cities in 2020 and expanded the program to include more cities in 2021. The Banque de France has been one of the most active central banks in terms of piloting the digital currencies for wholesale and retail customers in cooperation with Tunisian and Singaporean central banks. Other notable central banks are Reserve Bank of India, Central bank of Nigeria, The Bank of Ghana, and The Monetary Authority of Singapore. In 2022, The Central of Bahamas, and The Bank of Jamaica have officially launched their digital currencies.
The financial and monetary system is transitioning into contactless payment options and digital currencies. The Euro zone has witnessed a 25% drop in cash transaction whereas contactless payment options has also significantly increased in China (Tronnier et al., 2022). CBDC is considered to herald a new monetary era (Wang et al., 2022a). CBDC seeks to limit physical currency to accelerate a secure and efficient fast payment system (Bian et al., 2021).
These developments has engendered central banks to refocus on CBDCs. About 60-90% of central bank are engaged in various stages of CBDC research, pilot or development (Allen et al., 2022; Boar & Wehrli, 2021; Ferrari et al., 2022; Huang & Mayer, 2022; Laboure et al., 2021; Ozturkcan et al., 2022; Pelagidis & Kostika, 2022; Xu, 2022; Yang & Zhou, 2022). The Bank for International Settlement estimates that within three years, fifty percent of the world's population will be using CBDC (Laboure et al., 2021; Tronnier et al., 2022).