China and Kazakhstan central banks forge CBDC partnership

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 education and research projects.

The partnership between the People’s Bank of China (PBoC) and the National Bank of Kazakhstan (NBK) comes at a time when global interest in CBDCs continues to grow.

Under this agreement, the two central banks will share their expertise and knowledge in the field of CBDC development and implementation, carry out joint research projects, and increase the skills and competencies of employees involved in CBDC research and development.

Additionally, the development of a CBDC could enable faster, safer and more cost-effective cross-border transactions, which are vital to international trade and economic integration.

Observers say China and Kazakhstan’s joint development of centralized digital currencies could potentially lead to increased economic efficiency, lower transaction costs and improved financial inclusion.

Looking ahead, the partnership between China and Kazakhstan is expected to develop significantly. Kazakhstan, which is an observer in the CBDC project, may officially announce its intention to become a core participant after the completion of the joint research.

The global race for CBDCs

Countries around the world are accelerating their efforts to adopt CBDCs to increase financial inclusion, improve payment efficiency, and reduce reliance on the US dollar. However, the adoption of these digital currencies is facing stiff competition from established digital payment platforms like Paytm and Google Pay, which are quite popular among users.

The Reserve Bank of India has taken significant steps towards modernising its financial system by piloting wholesale CBDC, known as e-rupee-W, for financial institutions and retail CBDC, known as e-rupee-R, for the public.

In Indonesia, the central bank launched Project Garuda in 2022, which aims to introduce a digital e-rupiah. The initiative is designed to increase financial inclusion and facilitate cross-border payments, positioning Indonesia as a forward-thinking player in the digital currency landscape.

The Bank of Thailand has been testing a CBDC called the Retail Central Bank Digital Currency (CBDC-R) since 2020. The ongoing pilot aims to improve financial inclusion and increase payment efficiency, reflecting Thailand’s commitment to embracing digital innovation in the financial sector.

Other countries have also made notable progress in CBDC adoption. 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, which launched in eight member countries in 2021, to support cross-border payments.

In Sweden, the central bank Riksbank has been running a pilot for an e-krona CBDC since 2020, aiming to ensure the continued provision of a state-backed payment method in an increasingly digital world. Meanwhile, the UK 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 impact. However, the European Parliament has urged caution, advising “don’t be shy (but be prepared)” while the investigation continues.