China and Kazakhstan have entered into a strategic partnership to collaborate on Central Bank Digital Currency (CBDC) research. The initiative focuses on enhancing knowledge sharing, expertise, and employee competencies through joint training and research projects.
The People’s Bank of China (PBoC) and the National Bank of Kazakhstan (NBK) partnership comes as global interest in CBDCs continues to rise.
Under this agreement, the two central banks will share their expertise and knowledge in CBDC development and implementation, conduct joint research projects, and enhance the skills and competencies of employees involved in CBDC research and development.
Moreover, the development of a CBDC could facilitate faster, more secure, and cost-effective cross-border transactions, crucial for international trade and economic integration.
Observers note that a China-Kazakhstan co-development of CBDCs can potentially lead to increased economic efficiency, reduced transaction costs, and improved financial inclusion.
Looking ahead, the partnership between China and Kazakhstan is expected to evolve significantly. Kazakhstan, which has been an observer in the CBDC project, may formally signal its intention to become a core participant following the completion of the joint research.
The global race for CBDCs
Countries worldwide are accelerating their efforts to adopt CBDCs to enhance financial inclusion, improve payment efficiency, and reduce reliance on the U.S. dollar. However, the adoption of these digital currencies faces stiff competition from established digital payment platforms like Paytm and Google Pay, which are widely popular among users.
The Reserve Bank of India has taken significant steps towards modernizing its financial system by piloting a wholesale CBDC, known as the e-rupee-W, for financial institutions and a retail CBDC, the e-rupee-R, for the public.
In Indonesia, the central bank launched Project Garuda in 2022, aiming to introduce a digital e-rupiah. This initiative is designed to enhance financial inclusion and facilitate cross-border payments, positioning Indonesia as a forward-thinking player in the digital currency landscape.
Thailand’s central bank has been testing a CBDC called the Retail Central Bank Digital Currency (CBDC-R) since 2020. The ongoing pilot seeks to improve financial inclusion and increase payment efficiency, reflecting Thailand’s commitment to embracing digital innovation in its financial sector.
Other countries have also made notable strides in the adoption of CBDC. The Bahamas launched the world’s first CBDC, the Sand Dollar, in 2020, achieving a relatively high adoption rate, with over 15% of the population using it. Similarly, the Eastern Caribbean Central Bank introduced DCash in 2021, now operational in eight member countries, to support cross-border payments.
In Sweden, the central bank, Riksbank, has been running a pilot for its e-krona CBDC since 2020, aiming to ensure the continued provision of a state-backed payment method in an increasingly digital world. Meanwhile, the U.K is exploring the potential launch of a CBDC, with the Bank of England and HM Treasury focusing on complementing cash and bank deposits.
The European Union is currently investigating the feasibility of a digital euro, with the European Central Bank examining its design and potential impacts. However, the European Parliament has advised caution, recommending to “abstain (but be prepared)” while the investigation continues.