For now, central banks around the world are still working on developing and testing their own CBDCs, but there are new ones that are joining the race all the time.
The Bank of Israel, reportedly just launched a cryptocurrency pilot program of its own, with plans to create a CBDC using Ethereum’s network.
However, it appears that the project is bound to run into a number of challenges.
So far, there are several major nations that are taking a lead in the CBDC development, including China, Sweden, Japan, and France. All of these countries were working on their own CBDCs for years at this point, so they do have quite the advantage on the newcomers such as the central bank of Israel.
Israel is in the initial stages of CBDC development, according to recent reports, and they decided to use Ethereum. The central bank’s CBDC Project Manager, Yoav Soffer, explained:
“We did a trial with Ethereum technology, not because we think that that’s necessarily the technology we’ll use, but because it was a technology that was available for us in order to understand its advantages and disadvantages.”
The purpose of this trial is simply to try and identify the advantages and disadvantages of digital currencies, and for that alone, Ethereum is just as good a solution as anything else.
However, Soffer did say that the initiative has been very challenging. He pointed out the complexity of the project, which makes it difficult to predict how long the testing of the project might last, or when it will end.
The challenges are many, starting with uncertainty about whether a digital currency would serve the local population’s needs, in the first place. The infrastructure for a product of this kind is not ready to survive in the long term, and there is no backup solution in case of the network’s breakdown.
“It’s rather challenging to run a project like this. In general, projects at the Bank of Israel have start and finish dates. You know when they will end and what you need to achieve along the way. We don’t know when this project will end, with all that that implies.”
And, of course, the bank has to create a CBDC to be accessible and competitive compared to other types of payment.
China is currently leading the CBDC race with its digital yuan almost ready for launch. In fact, the public trials for digital yuan have been going on for nearly two years now after the completion of its development in 2019.