From the Bahamas to Nigeria, China to Jamaica, a common theme unites countries that have rolled out their own CBDC: very few people actually use them.

Around the world, major economies are in an urgent race to launch their own central bank digital currencies. Data suggests a staggering 134 countries, representing 98% of global GDP, are now experimenting with one. Of those, just three have launched so far, while 36 more are currently in pilot programs.

But despite the talk of faster cross-border transactions, reduced fees for businesses, and innovative new payment methods, demand has been tepid.

Challenges in CBDC Adoption

The Federal Reserve Bank of Kansas City released a report examining the success of three retail CBDCs in the Caribbean. It noted that none had managed to achieve widespread adoption among consumers. Figures show just 105,000 consumers and 1,500 merchants had embraced the Bahamian Sand Dollar by May 2023 — representing a mere 0.19% of the total currency in circulation.

DCash, spanning the Eastern Caribbean Currency Union, and Jamaica’s JAM-DEX have fared even worse, with shares of just 0.16% and 0.11% respectively.

Global Issues with CBDC Implementation

In Asia, there have been similar issues. India has promoted the digital rupee for offline transactions in areas with little internet access and programmable payments. However, a Reuters report revealed that, within six months, usage had plummeted to a mere tenth of the levels seen in December 2023 after incentives for early adopters ended.

In China, government workers receiving their salaries in the digital yuan were swapping it for cash immediately, highlighting a lack of confidence. Meanwhile, the International Monetary Fund noted that adoption of Nigeria’s eNaira was “disappointingly low” in the 12 months after launch, with 98.5% of wallets going unused.

Barriers to CBDC Adoption

There are many reasons why central bank digital currencies are struggling to take off:

  • Lack of Awareness: Many people are not aware of what a CBDC is.
  • Technical Divide: Older consumers accustomed to physical cash face challenges.
  • Privacy Concerns: Questions about transaction privacy compared to cash.
  • Limits on Holdings: Restrictions on the amount of CBDC a single consumer can hold.
  • No Interest Payments: Lack of interest payments can be off-putting.

Commercial banks are also concerned that CBDCs could undermine their business models.

Future of CBDCs

For CBDCs to gain traction, they need to offer clear and compelling benefits that existing payment methods cannot match. In countries like China, where super-apps blend messaging, shopping, and more, this is easier said than done.

Some countries are introducing regulations to mandate the use of CBDCs. For example, the Bahamas is working on rules to force central banks to offer access to the Sand Dollar. Success here could influence other economies.

Crypto enthusiasts are keenly watching the struggles of CBDCs, noting the lack of momentum in their uptake.

With major economies such as the U.K., U.S., and EU still years away from launching their own CBDCs, and with no guarantees, some regions may abandon this policy altogether.

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