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Public interest in central bank digital currencies surpasses Bitcoin in 2020

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A new report from the Bank for International Settlements (BIS) shows that 2020 is the year that momentum behind central bank digital currencies (CBDCs) has truly taken off.

Published on Aug. 24, BIS’ new working paper analyzes the global state of CBDC research and development work, technical approaches and policy stances. The comprehensive research draws on over 16,000 central bank speeches from recent years and assesses existing CBDC designs and motivations behind various countries’ embrace of the new model.

“Attitudes about whether central banks should issue them [CBDCs] have changed noticeably over the past year,” the paper’s authors write. Their research includes a striking analysis of public interest in CBDCs over time. BIS’ data shows that in 2020, worldwide internet searches for CBDCs decisively outflanked searches for Bitcoin (BTC) and Facebook’s Libra.

The data vindicates the report’s claim that even though the concept of CBDCs was proposed decades ago, “CBDCs have seized global attention” in 2020.

BIS provides several hypotheses as to why this may be. First, it points to the announcement of Facebook’s Libra and the subsequent public sector response in 2019 as an unmistakable “tipping point.”

Further data backs this up: as of late 2019, “central banks representing a fifth of the world’s population reported that they were likely to issue CBDCs very soon.” Moreover, the share of central banks likely to issue a retail CBDC over the medium term (1-6 years) doubled in 2019.

A crucial factor quickening this trend, in BIS’ analysis, is the advent of the coronavirus pandemic:

“Social distancing measures, public concerns that cash may transmit the COVID-19 virus and new government-to-person payment schemes have further sped up the shift toward digital payments.”

BIS draws attention to the United States, where early versions of Congressional bills on fiscal stimulus referred to the potential for a digital dollar to hasten the disbursement of government aid to citizens. In the Netherlands, China and Sweden, central banks are keeping their CBDC research work a high priority during the pandemic.

All these factors could be enough, in BIS’ view, to overcome the “great inertia” typical of retail payment behaviors. The flipside, however, is lasting impact:

“When behaviours change, they often do so quite persistently. In the same manner, changed payment behaviors caused by the COVID-19 crisis, such as a greater use of digital payments, could have far-reaching effects in the future.”



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Regulation

El Salvadorians take to the streets to protest Bitcoin law

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Protesters calling themselves the Popular Resistance and Rebellion Block have come out against El Salvador’s government passing a law making Bitcoin legal tender.

A Tuesday tweet from local news outlet El Mundo shows El Salvadorians carrying banners saying “no to Bitcoin” in the streets of San Salvador demanding a repeal of the country’s Bitcoin law. Legislative assembly members Anabel Belloso and Dina Argueta addressed the protesters after first meeting the group separated by a barrier of razor wire.

In a letter made available at the protest, the Popular Resistance and Rebellion Block group claimed that President Nayib Bukele passed the law making the cryptocurrency legal tender in the country without proper consultations with the people. It also cited the volatility of Bitcoin (BTC), comparing investing in the cryptocurrency to playing the lottery: “betting on the lottery is a voluntary act, while Bitcoin is required by law.”

Related: Coercion and coexistence: How El Salvador’s Bitcoin Law may change global finance

However, the group’s main grievance around the Bitcoin legal framework seemed to be centered around a perceived disparity in the cryptocurrency’s usage by the government when compared with the average resident in El Salvador. Protesters said Bitcoin “only serves some large businessmen, especially those linked to the government, to launder ill-gotten money.”

“Entrepreneurs who put their capital in Bitcoin will not pay taxes on their earnings,” said the letter. “In addition, to apply Bitcoin the government will spend millions of dollars of the taxes paid by the people.”

They added:

“Bitcoin would facilitate public corruption and the operations of drug, arms and human traffickers, extortionists and tax evaders. It would also cause monetary chaos. It would hit people’s salaries, pensions and savings, ruin many MSMEs, affect low-income families and hit the middle class.”

Though passed by El Salvador’s government and signed into law by Bukele in June, the law recognizing Bitcoin as legal currency in the country will not go into effect until Sept. 7. The Popular Resistance and Rebellion Block’s protest was aimed at government officials to demand the law be repealed. In addition, the World Bank has also refused to help El Salvador transition to a Bitcoin-friendly framework, given its “environmental and transparency shortcomings.”

Related: What is really behind El Salvador’s ‘Bitcoin Law’? Experts answer

During a scheduled visit by the U.S. State Department earlier this month, Under Secretary of State for Political Affairs Victoria Nuland suggested El Salvador ensure Bitcoin is well regulated and transparent, but did not explicitly say anything against the country’s move to a more digital economy. Some proponents of the law including Bukele have suggested Bitcoin could help facilitate remittance payments from El Salvador citizens living abroad and lessen the country’s reliance on the U.S. dollar.