At the dawn of a new digital era, cryptocurrencies are emerging as the pioneers of a global financial revolution. These are progressing as legitimate currencies, thereby redefining the traditional dynamics of economics and finance. Recently, however, a new trend has emerged: the exploitation of cryptocurrencies by States for the creation of sovereign digital currencies. Governments around the world, who were previously skeptical of the evolution of Web 3, now appear to be embracing blockchain technology and cryptocurrencies, recognizing their ability to transform current monetary systems.

MNBCs, a solution for emerging countries

THE sovereign digital currenciesor CBDC (Central Bank Digital Currencies), are envisaged as a means for States to maintain their monetary sovereignty, while benefiting from benefits of blockchain technologysuch as security, transparency and efficiency.

Africa, facing monetary challenges such as low banking coverage, volatility of local currencies and obstacles to international money transfers, has found cryptocurrencies a valuable tool to overcome some of these challenges. Indeed, local currencies in Africa are often subject to significant devaluation, and traditional monetary systems, such as the CFA franc, are criticized for their lack of financial sovereignty. Additionally, Africa has the lowest banking rate in the world, with many Africans lacking access to traditional banking services due to poverty, lack of official documentation and lack of postal addresses formal.

In response, services like M-Pesa have revolutionized financial transactions, allowing users to send, receive and store money on their phones, even without internet access. And obviously, Bitcoin has become particularly popular in Nigeria and the Central African Republic as a tool for cheaper and more efficient international money transfers, without KYC requirements. Better yet, innovative services like Machankura have been developed, allowing people to buy, sell and transfer Bitcoins using USSD technology, even without internet access.

In Africa, MNBCs are a response to the continent's financial challenges.In Africa, MNBCs are a response to the continent's financial challenges.
Monetary suffering, one of Africa's challenges

State BTC still needs to prove itself in developing countries: the example of El Salvador

El Salvador, the first country to legalize Bitcoin as official currency in September 2021, thus hoped to improve access to the banking system, reduce dependence on the American dollar and facilitate international transfers. However, despite government efforts, such as the creation of the Chivo Wallet application and financial incentives, Bitcoin is little used.

A significant portion of the population has not adopted the app, citing a preference for cash payments and a lack of trust in Bitcoin. Among those who have downloaded the app, usage remains limited, and engagement declines after the initial incentives are used. On the business side, only a minority accepts payments in Bitcoin, and a small proportion of these businesses have actually received payments in cryptocurrency. Additionally, the majority of them immediately convert received Bitcoins into dollars, indicating a distrust of the cryptocurrency's volatility.

Bitcoin adoption in El Salvador has not yet reached its set goals, with its use still remaining very marginal despite the efforts of the government.

The adoption of bitcoin in El Salvador shows the limits of a state bitcoin.The adoption of bitcoin in El Salvador shows the limits of a state bitcoin.
The adoption of Bitcoin in El Salvador, a painful hope?

BRICS state cryptos against the dollar king of the USA and the world

Robert Kiyosakithe author of the essential Rich Dad Poor Dad, recently shared his predictions regarding the global monetary future. He said BRICS (Brazil, Russia, India, China, South Africa) are considering launching a gold-backed cryptocurrency, which he said could mark the decline of the US dollar. This prospect of a common BRICS currency has already been discussed in the media, part of a broader trend of “dedollarization”, where various countries and economic blocs are seeking alternatives to the dollar due to concerns over US debt and the use of the dollar in economic sanctions.

This common currency would serve to facilitate trade between members without depending on the US dollar, and thus avoid monetary sanctions from Washington. This project clearly aims to fight against US hegemony in the global monetary system and in which the BRICS represent a significant share of the global economy, with a quarter of global GDP and 42% of the global population.

However, the practical implementation of this common currency is complex, requiring business buy-in and close coordination between member countries, which have divergent political and economic systems. However, according to experts, the feasibility of the project is called into question precisely because of these economic and political differences between member countries, as well as logistical and regulatory challenges.

The euro and the dollar are not left out

THE Western powers, mainly the United States and the European Union, are making progress towards the creation of central bank digital currencies (CBNC). In the United States, following a request from President Joe Biden, a report on the “future of money” was released, highlighting the importance of responsible development of digital assets for national interests. Additional studies are planned, led by the Treasury and the Federal Reserve, to further explore the possibility of an “e-dollar.” In Europe, the European Central Bank (ECB) collaborates with companies to develop user interfaces for the digital euro, aiming to evaluate the integration of digital currency technology with business prototypes.

These efforts are in part a response to the rise of cryptocurrencies, with particular attention paid to the regulation of these digital assets. The digital euro would complement cash, offering an additional and free payment solution. It would be usable anywhere in the euro zone, guaranteeing security and confidentiality.

Unlike cryptoassets, the digital euro would be stable and secure, guaranteed by the ECB, thus ensuring constant value, where a digital euro would always have the same value as a one euro coin. The ECB also guarantees the confidentiality of transactions, without saving users' personal data, and offers free use of the digital euro, thus strengthening the monetary sovereignty of the euro zone and promoting competition in the European payments sector.

Initiatives to develop an MNBC in Europe are even becoming more and more concrete. Thus, the digital euro says to retails, of course, will wait a little longer before its implementation, however, the Bank of France intends to press on with regard to the establishment of a so-called wholesale MNBC. There are many partners such as Petale or Forge, a subsidiary of Société Générale.

The project will enter its preparation and experimentation phase in November 2023 during which the foundations of a possible digital euro will be established. The introduction of the digital euro will, however, only be decided after the adoption of the appropriate legislative framework by the Council and the European Parliament.

Each of these cases reveals the opportunities and challenges inherent in integrating cryptocurrencies into global and national financial systems, highlighting an evolving journey toward a new digital monetary era.

According to the University of Bern in Switzerland, the digital euro is doomed even before its creationAccording to the University of Bern in Switzerland, the digital euro is doomed even before its creation
The digital euro, the European MNBC.

The serious impact on the global financial system

The introduction of MNBCs by central banks represents a fundamental change in the way money is created, distributed and managed. Unlike decentralized cryptocurrencies like Bitcoin, MNBCs are issued and regulated by states, giving them potentially greater legitimacy and stability. This transition to official digital currencies could reduce reliance on traditional payment systems and fiat currencies, thereby changing global monetary power dynamics.

One of the most significant impacts of MNBCs is their potential to facilitate cross-border transactions. By simplifying international trade, MNBCs could reduce transaction costs and speed up money transfers, thereby promoting global trade. This increased efficiency could challenge the role of dominant reserve currencies, such as the US dollar, and could lead to a more diversified and multipolar global financial system.

However, the integration of MNBCs also raises significant regulatory challenges. The need for consistent international regulation is crucial to avoid potential abuses and ensure the stability of the global financial system. Issues of privacy and data security are also of concern, as governments must balance monitoring financial transactions to prevent illicit activity with protecting the privacy rights of individuals.

Widespread adoption of MNBCs could reshape the global financial system. By facilitating cross-border transactions and reducing associated costs, MNBCs could decrease reliance on reserve currencies like the US dollar. This could lead to a more diverse and potentially more stable monetary landscape, although this depends heavily on how different economies adopt and integrate these technologies.

In any case, the implementation of MNBCs is not without challenges. Data security and privacy concerns are at the forefront as governments must balance the need to monitor and regulate financial transactions with respecting citizen privacy. Especially since the harmonization of regulations on an international scale is essential to avoid disparities which could hamper global trade and financial stability…

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