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Why CBDCs fail: a lack of trust in authorities?

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I spend a lot of time thinking about the way the network is impacting finance. The network is the network of citizens, enabled by mobile smartphones, the internet and cloud computing. The result is that everything can be developed and delivered on a peer-to-peer decentralised basis. The knock-on effect is that governments and centralised institutions like banks, have been scrambling to ensure their continued relevance.

A good example is the friction between cryptocurrencies versus central bank digital currencies (CBDCs). This friction truly shows that the battle between decentralisation and centralisation. Cryptocurrencies are decentralised but can cause issues, as illustrated by the collapse of Terra-Luna (a stablecoin); nevertheless, the success of bitcoin and its brethren has led to a scramble by governments to rapidly transform fiat currencies and paper bank notes and coins to be completely available in a digital form. That’s what CBDCs are all about.

So, what exactly is a Central Bank Digital Currency (CBDC)? According to the Atlantic Council, “a CBDC is virtual money backed and issued by a central bank. As cryptocurrencies and stablecoins have become more popular, the world’s central banks have realised that they need to provide an alternative—or let the future of money pass them by.”[1]

The Atlantic Council have been tracking and tracing CBDCs for quite a while, and find that there are very few live examples in operation today. A few have been made live in the Caribbean and the eNaira is live in Nigeria but, apart from these, most countries are still in Proof-of-Concept (PoC) phase.

Admittedly, some countries are further ahead than others. For example, China ran a PoC of the eYuan during the 2022 Winter Olympics in Beijing but the adoption, by summer 2023, has been disappointing. They even gave away millions of dollars in digital yuan in several cities, such as Beijing and Shenzhen, encouraging citizens to use the virtual money but it did not succeed. Transactions using the currency totalled just 100 billion yuan ($14.5 billion) by the end of August 2022. Compare that with Alipay, one of two major payments apps (the other is WeChat Pay) in China, whose app was processing app $1.6 trillion each month on average — more than a thousand times the digital yuan’s monthly transaction volume at that time.

The same happened in Nigeria. Nigeria’s released their CBDC, the eNaira, in 2022 to widespread interest. However, as of October 2022, it barely had any usage within a country full of crypto-curious investors, and this has meant that there are views it will need to be redesigned and relaunched.

In fact, to put this in context, Nigeria has a shortage in the supply of Naira paper notes[2] and yet people don’t want to use the eNaira and, instead, prefer cryptocurrencies. With a total cryptocurrency transaction volume amounting to USD$400 million, Nigeria ranks third after the United States and Russia in their use of such currencies and, according to a 2020 online survey by Statista, 32% of participating Nigerians used cryptocurrencies, the highest proportion of any country in the world.


Because Nigerians enjoy trading and make over a million cryptocurrency transactions per month (figures as of 2020)[3][i] but, more than this, many African nations don’t trust governments or government issued currencies. Just look at Zimbabwe as an example or, on a wider horizon, Venezuela. It is why El Salvador and the Central African Republic adopted bitcoin as legal tender.[4] Another reason is that citizens are learning they can move money freely and easily, with no fees or intermediaries, across borders and peer-to-peer, in real-time. These are the major advantages of decentralised money.

Meanwhile, central banks, governments and regulators still try to encourage more adoption of CBDCs. For example, the Jamaican government introduced two incentive programmes in March 2023 to encourage Jamaicans to sign up for their CBDC, the JAM-DEX. Yet, once again, this was in response to disappointing adoption after the launch of JAM-DEX in summer 2022.

For example, once launched, the Jamaican government ran a consumer incentive to reward the first 100,000 Jamaicans who signed up for the JAM-DEX with a J$2,500 (USD$16) deposit. However, only 36,000 people took advantage of the scheme, and so it was extended to people who didn’t have bank accounts and simplified the KYC process. It still didn’t succeed.

These illustrations of centralised versus decentralised currencies clearly delineate between trust in the government and trust in the network. It appears today that, particularly in nations with unstable economies and rife corruption of those who are in power, that the citizens would prefer control of their money through a democratic network than a dictatorial machine.


[1] See the CBDC tracker monitoring by the Atlantic Council

[2] Nigeria's naira shortage: Anger and chaos outside banks, BBC, February 2023

[3] Why Nigeria is a global leader in Bitcoin trade, BBC, February 2021

[4] The Central African Republic’s bitcoin experiment failed. The reasons are multiple but relate to the nation's challenging economic conditions, scepticism surrounding its motives, limited access to technology and unfulfilled promises that related to its adoption. Hence, the legal tender status was repealed a year after announcement in March 2023.

Image Authority Nick Youngson

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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