According to an economist at a World Economic Forum (WEF) event, central bank digital currencies (CBDCs) offer advantages such as expiry dates and restrictions on certain purchases. The event, known as Summer Davos, was held in Tianjin, China. Eswar Prasad, a professor at Cornell University, stated that physical currency is on the verge of disappearing, and CBDCs could either lead to a better or darker economic landscape. He explained that programmable CBDCs allow governments to control the use of central bank money and influence societal behavior. However, Prasad also warned that this level of control could be dangerous for central banks’ independence and the integrity of their money.
The integration of expiry dates with CBDCs has been a topic of discussion among central banks worldwide. The Bank of Canada has published a paper exploring the benefits and drawbacks of expiry dates on digital money. They suggest that expiry dates would automate personal loss recovery and potentially increase consumer demand for digital cash. China has also explored the use of expiry dates for its digital yuan, implying that the currency would become unusable if not spent within a specific timeframe. The World Bank has studied the effects of expiring money and suggested that it could be a tool for stimulating consumption during recessions or pandemics.
Despite the growing interest in CBDCs with over 100 countries researching them, there is skepticism surrounding government-controlled digital money. A survey by the Cato Institute found that only 16 percent of Americans support the adoption of a CBDC, with concerns about government surveillance and control over individuals’ spending habits. Some Federal Reserve officials have also expressed doubt about the necessity and risks associated with CBDCs. In response to these concerns, House Republicans introduced the CBDC Anti-Surveillance State Act to prevent the issuance of a surveillance-style digital dollar.
However, the adoption of CBDCs in places that have implemented them has been minimal. In Nigeria, fewer than 0.5 percent of citizens have used the eNaira, despite attempts to incentivize its use. The lack of public adoption has been considered disappointingly low by the IMF. China has been trying to boost adoption rates for the digital yuan, but there is still a preference for cash or mobile payment applications. Pilot projects for CBDCs are also being rolled out in Japan and Russia to determine consumer demand.
At the European Central Bank (ECB) forum, ECB chief Christine Lagarde confirmed that the governors in the governing council would decide on the launch of a digital euro by the end of October.