shopper approved

    Central Bank Digital Currencies Struggle to Take Hold

    We live in an ever-changing world. One of the hardest concepts we learn when young is that change is inevitable. This is just a fact of the world we live in, and something we have to account for in many aspects of our lives.

    One such change that has recently come about is that the world is moving towards digital currencies. The BIS, central banks, and governments around the world have been working on digital currencies for quite some time.

    They are seen as a replacement for the paper money we have been using here in the US for over 100 years, for example. While they offer many benefits to the central banks and governments, citizens have been more skeptical. In fact, two early use cases show that people are not quite ready to move on from their familiar paper money.


    China’s rollout of its digital currency, the e-CNY, has not been successful to start. According to an article on from December 2022:

    “That’s according to a former official from the People’s Bank of China, whose comments were reported Thursday (Dec. 29) by Reuters, which cited state media outlet Caixin. That official, Xie Ping, said he was disappointed with the results of China’s test of its digital yuan and said the program needed to be expanded.

    “The cumulative circulation of the digital yuan in the two years of the trial has been only 100 billion yuan ($14 billion),” Xie told a conference at Tsinghua University, per Reuters. The number indicated that “usage has been low, highly inactive.”

    “The results are not ideal,” Xie, a former director-general of research for the Chinese central bank. “What needs to change is the digital yuan acting only as a substitute for cash and only for consumption.”

    That is not exactly a ringing endorsement of the country leading the charge around the world into the digital money era. One reason cited by experts is the existence of third-party, private digital currencies AliPay and WeChat Pay. Those private digital payment systems have been in existence longer than the government’s digital currency e-CNY. Citizens have taken to using those, much like we might use applications Paypal, Venmo, or Cash App here in the US.

    While the latter examples are not technically digital currencies, they are digital payment portals that allow quick transfer of funds to others using an email address or phone number. In essence, the private payment methods simply represent citizens’ preferences to digitally transfer the existing currencies in circulation.

    Users must onboard funds from the banking system using a debit card, ACH, or another standard transfer method. And then they can use the apps to transfer funds to whomever they want in a simple private transaction. But those aren’t replacements for the currency; rather, they are simply more efficient systems to move existing money around the banking system.

    Central Bank Digital Currencies (CBDCs) represent a whole new monetary system apart from the existing one. And it is that hurdle that has been harder for people around the world to overcome.

    Back to the e-CNY as the Chinese are now giving away their digital currencies to get citizens to use them. And while an expensive marketing tactic, they have gained a bit of traction. After all, who doesn’t like free money?

    Per a February article on Cointelegraph, the Chinese have been giving away millions in e-CNY in order to boost adoption.

    “Millions of dollars’ worth of China’s central bank digital currency (CBDC) has been handed out across the country over the Lunar New Year period in a bid to boost its takeup.

    Multiple cities reportedly gave away over 180-million-yuan ($26.5 million) worth of the CBDC in programs such as subsidies and consumption coupons.”

    Well, that is certainly one way of increasing adoption. But it immediately begs a bigger question: is the e-CNY worth anything? If something must be given away in order to be used, it indicates the inherent utility value is close to zero. That is just basic market economics.



    Nigeria is another country jumping on the CBDC bandwagon. And they have had very similar results to China in the early going. According to The Guardian, Nigeria has been struggling with cash shortages as swaps of old naira currency bills were exchanged for new ones.

    Nigerian citizens were very upset when exchanges for the new physical currency were slow and limited. The people simply did not have enough currency to maintain the economy daily. Turns out this was by design. According to the Associated Press, Nigeria’s Economic and Financial Crimes Commission said in a statement as much.

    “The Central Bank of Nigeria introduced the redesigned notes and new limits on large cash withdrawals to help recover about 85% of the total currency in circulation outside the banking system. It said this would also help curb money laundering and make digital payments the norm in Africa’s biggest economy, that’s currently largely driven by cash transactions.”

    The only problem with the early adoption of CBDCs is that people don’t tend to like them. This is the early scoreboard on the Nigerian CBDC rollout:

    • OTC withdraws are limited to $225 x week
    • ATM limited $45 x day
    • Citizens have taken to the streets to protest demanding paper money be restored.
    • Less than 0.5 % of Nigerians have used the CBDC

    Not great by any measure.

    Final Thoughts

    In a world of change, one thing is also constant. And that is cyclicality. For example, we have four seasons every year. While we say that seasons change, the reality is they simply cycle repeatedly in a contained system that never really changes itself.

    Economics is the same way. We have birth, death, and rebirth cycles in finance and money much like we see in nature. This is just the natural order of things. This concept is called natural economic law. And it is a concept that not even the largest or most sophisticated government systems can change.

    Why is that? Because one is governed by the universe, and the other by people created in that universe. We haven’t broken the fourth wall of our current universe or its set of physical and natural laws yet. Central banks may not like it, but it won’t change who makes the rules on this planet. We are just its current inhabitants.

    Disclaimer: All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.

    Top Stories

    Metals Market Broadsheet July 15-19
    Metals Market Broadsheet, July 8-12
    Metals Market Broadsheet June 24-28
    Read More

    Subscribe to JM Bullion’s newsletter to receive timely market updates, sales and giveaways.