Gold Off To A Slow Start As Central Banks Pivot Toward Digital Currencies

Some central banks are ahead of others in launching a CBDC. As I said, the Bahamas has the Sand Dollar, while Cambodia has the Bakong. Gold-loving China has reportedly been working on a digital yuan since 2014, and recently it doled out millions of dollars’ worth of the prototype currency to people in Shenzhen and other cities to test drive. Meanwhile, Britain’s Treasury and the Bank of England (BOE) announced last week the creation of a task force to look into what some people are calling the “britcoin.”

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No Cash, No Problem

Transitioning to digital currencies is easier when the country already has a history of preferring online payments to paper cash. Take Sweden and Norway, two of the most cashless societies. Both Nordic countries are currently working on their own CBDCs.

As some of you may know, Sweden was the world’s first country, in 1666, to issue paper money. Today, it’s set to become one of the first to introduce a digital token, the e-krona, possibly as early as November 2022. The move follows years of declines in the amount of banknotes and coins circulating in the Swedish economy. Only around 6% of transactions are believed to be made using physical cash.

Amount of Physical Banknotes an Coins Circulating in Sweden at Multi-Decade Lows

In neighboring Norway, that figure is even lower at between 3% and 4%. In a press release published last Thursday, the Norges Bank says it plans to “test technical solutions for a central bank digital currency (CBDC) over the next two years.”

Bitcoin Dominance Drops, Opening the Door to Other Cryptos

Again, CBDCs are not expected to compete with cryptos such as Bitcoin, which is taking its place as a tradeable asset like gold.

The world’s largest cryptocurrency is well off its all-time high, having dipped below $50,000 last Friday for the first time since early March in response to news that President Joe Biden is expected to propose a hike in the capital gains tax to as high as 43.4%. Investors clearly had some feelings about this proposal: Stocks fell close to 1% last Thursday.

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