Bangladesh Bank, the central bank of the South Asian country, has revealed plans to conduct a feasibility study on the possibility of introducing a central bank digital currency (CBDC) backed by blockchain technology.
Minister of Finance AHM Mustafa Kamal disclosed the plan before the Bangladesh parliament as part of the country’s budget for the 2022-23 financial year. According to Kamal, many countries worldwide are looking into CBDCs as viable alternatives to risky private digital currencies. The minister noted that the growth of the country’s internet coverage and e-commerce sector has made it necessary to consider this alternative, adding that the main purpose of the CBDC will be to facilitate virtual transactions and encourage startups and e-commerce businesses.
“As a result of the time-befitting steps of the present government, the coverage of the internet and e-commerce in the country has increased tremendously. In this context, Bangladesh Bank will conduct a feasibility study on the possibility of introducing CBDC in Bangladesh,” the minister said in his speech.
The feasibility study on a CBDC launch is part of a broader reform initiative the country’s MoF and central bank have planned. Other programs include digitizing the country’s public service, deepening financial inclusion, and maintaining stability in the financial sector.
Bangladesh has long encouraged the adoption of blockchain technology. Back in 2019, the government spent around $208 million to give 300 of its top graduates overseas scholarships to study emerging digital technologies. Among these, 100 were to study blockchain technology.
However, this interest in blockchain technology has not extended to digital currencies, which the government has remained skeptical of. According to BDnews 24, a local news outlet, several people have even been arrested for illegally using digital assets in the country.
CBDCs adoption in Asia
Bangladesh is not the only country considering launching a CBDC in Asia. Across the continent, countries including its neighbor, Bhutan, have made significant progress in their CBDC launch projects.
Bhutan partnered with a leading blockchain company to explore the possibility of a digital ngultrum last year. At the time of the announcement, Bhutan’s approach to digital currencies was praised as it contrasted with the course taken by El Salvador, which made Bitcoin legal tender.
China and India are also pursuing the possibility of a CBDC. China is notably one of the leaders in the field, having already carried out several tests of its e-CNY.
India, like Bangladesh, only began to study the possibility as part of their budget for the 2022-23 financial year. India has stated that it will roll out its CBDC in a gradual manner.