Former Binance CEO and founder Changpeng “CZ” Zhao calls Central Bank Digital Currencies “outdated” in the face of stablecoin acceleration. What happened to CBDCs and why are they fading now?
Summary
- CZ says central bank digital currencies are now “outdated” as stablecoins continue to dominate the global market.
- So far, at least 10 countries have halted the continuation of CBDC pilot projects due to lack of demand and other factors.
During his keynote speech at the WebX conference held in Tokyo, Japan on August 25, CZ highlighted how countries have shifted their stance towards digital currencies, particularly in the case of stablecoins.
He observed a global trend of governments embracing stablecoins, as demonstrated by the emergence of regulatory framework centered around the fiat-backed asset. These include Hong Kong’s Stablecoin Ordinance and the GENIUS Act in the United States.
In fact, he went as far as to say that CBDCs are losing steam in the face of accelerated stablecoin adoption, becoming outdated in comparison to its stronger competitor.
“Central Bank Digital Currencies are already outdated. In contrast, stablecoins are gaining more attention,” said Zhao in his speech.
Earlier this year, Standard Chartered reportedly projected the stablecoin sector will grow to reach $2 trillion in value. It is currently valued at around $260 billion.
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CZ’s take on stablecoins vs CBDCs
During his session, CZ took the opportunity to highlight the benefits of using stablecoins over central bank digital currencies. According to Zhao, stablecoins are more likely to be accepted by the wider market as they are backed by “real collateral and support.”
Moreover, he observed that some countries that are notoriously opposed to digital currencies are starting to soften their stances in the wake of stablecoin domination.
Most notably, China is said to be exploring a yuan-backed stablecoin to counter the influence of USD-pegged stablecoins. Despite the country having banned crypto trade and mining since 2021, country officials have tasked experts with delving deeper into digital currencies and the feasibility of changing their stance.
On the other hand, CZ brought up how some countries began experimenting with various CBDC-focused projects as early as 2013 or 2014 right up to the 2020s. However, these projects soon faded into obscurity after stablecoins exploded in the market.
CZ cited a lack of demand for CBDCs as the reason for their defeat. Though, he also mentioned that only a select few managed to advance to the adoption stage; including the Bahamas’ Sand Dollar, Nigeria’s eNaira, as well as Ghana’s e-Cedi.
In fact, European Central Bank President Christine Lagarde stated that the central bank is gearing to launch the digital Euro by October 2025.
How many countries have abandoned CBDCs?
In recent years, at least 10 countries have chosen to abandon their quest to develop central bank-controlled currencies in favor of pursuing stablecoin adoption. The passing of Guiding and Establishing National Innovation for U.S. Stablecoins Act or GENIUS Act in the U.S have spurred further acceleration in this sector.
Countries like Japan, Denmark, Finland, Singapore, South Korea, and the U.S. have declared that they will be pausing or dissolving their CBDC pilot projects. Many of them cited high costs, difficulties in the testing stage or lack of retail use cases as the reasons for the halt.
Most recently, the Bank of England is considering halting plans to create a digital pound as the global focus shifts to stablecoins. Although the final decision is still awaiting approval, banks have been urged to shift their focus away from CBDCs to develop “payment innovations that could result in similar benefits” for customers, namely tokenized deposits.
Read more: Stablecoins dominate, Bank of England considers halting digital pound plans: report
