The idea of state-backed or national cryptocurrencies appears from time to time. Some countries have already implemented a national cryptocurrency. Others waver, wondering about the practical application and use of such technology.
Here is a list of the countries using a state-backed cryptocurrency, and whether your country will start using one any time soon.
What Is a State-Backed Cryptocurrency?
A state-backed cryptocurrency is a cryptocurrency developed and run by the government of a single nation. Traditionally, cryptocurrencies are stateless and decentralized, working across borders, the idea being that no single entity controls the development of the cryptocurrency.
A national cryptocurrency, then, somewhat works against those ideals. A central development team working closely with a government to achieve a specific financial outcome is the opposite of Bitcoin, for instance.
A national cryptocurrency isn’t a replacement for the existing fiat currency system. At least, not at the current time—no country has switched to using just crypto. It does, however, offer citizens the chance to use a cryptocurrency in place of fiat currency or to pay for services using a government-backed digital currency.
There is another issue, too: the difference between a digital currency and a cryptocurrency. Digital currency isn’t the same as a cryptocurrency. A cryptocurrency uses a decentralized system to ensure no single entity controls the currency and underlying technology. Whereas, a digital currency can function without decentralization using existing financial database technology. There are numerous reports of a country releasing a state-backed crypto, only for it to emerge that it is a digital currency.
These are known as central bank digital currencies (CBDC). At the time of writing, more countries are implementing CBDCs than cryptocurrencies. The following provides an overview of which countries are doing what.
3 Countries Considering or Implementing a National Cryptocurrency
The number of countries already using a cryptocurrency as the official state currency is very small. Other nations are considering implementing a cryptocurrency, but these are few and far between, too.
1. Venezuela: Petro
The Venezuelan cryptocurrency, the Petro, is one of the most well-known national cryptocurrencies. The 2017 introduction of the Petro wasn’t just symbolic. It was meant to become a genuine alternative to the Venezuelan bolivar, which continues to experience hyperinflation. Furthermore, the Venezuelan Petro would have the backing of the country’s vast reserves of oil, gold, and diamonds.
It’s great states (Iran, Venezuela, China, Russia) are trying state-crypto currencies. It’s an important step.— Max Keiser, tweet poet. (@maxkeiser) January 29, 2019
All theirs will fail and they’ll realize only #Bitcoin gives them what they seek:
Escape from $USD. pic.twitter.com/rOZeuMTQoL
Critics remain skeptical toward Petro. The initial Petro white paper lacked technical oversight and was modified multiple times following its release. Despite claims from the Venezuelan government that the Petro token price would link to oil prices, there is no mechanism in the cryptocurrencies code for that to take place.
The country of Venezuela can tout a national cryptocurrency. But it has very little value inside the country, and less so outside. Or, as The Washington Post economic reporter Matt O’Brien summarizes, “The Petro might be the most obviously horrible investment ever . . . The Petro is about creating something useless—that’s why only foreigners can buy them, but only Venezuelans can spend them.”
That’s not to say Venezuelan’s are unaware of cryptocurrencies. Venezuela is one of the world’s largest users of Bitcoin, Bitcoin Cash, and other cryptocurrencies. As the national fiat currency is horrendously unstable and essentially worthless, and the country is subject to intensive international sanctions, Venezuelan citizens turn to Bitcoin and other cryptocurrencies to keep life ticking over with some regularity.
2. Dubai, UAE: emCash
In 2017, Dubai announced a state-wide (or emirate-wide) cryptocurrency, known as emCash. The Dubai Department of Economic Development will work with the blockchain payment provider (and blockchain smartphone developer), Pundi X and UK-based startup, Object Tech Grp Ltd, to create “an encrypted digital currency, which people can use to pay for various government and non-government services.”
“Customers can choose between two payment options on the emPay platform—the existing dirham payment or emCash. While the dirham payment goes through normal settlement procedures, intermediaries and costs, emCash payments are settled directly between the user and merchant,” said Muna Al Qassab, CEO of Emcredit Limited, who is leading the emCash cryptocurrency project.
“emCash thus gives real-time value movement and merchants can pass the cost-benefit to the emCash holder. It also reduces fraud as well as inflation since the currency is issued in real-time based on actual demand.”
Unfortunately, there is very little news regarding emCash. 2019 was a very quiet year for emCash, although the Dubai authorities are keen to stress that the project is very much alive. While emCash cryptocurrency development began with Object Tech Grp Ltd, bringing in the crypto PoS expertise of Pundi X is a positive step. Expect to hear more about emCash soon as Dubai positions itself as a state for blockchain innovation.
3. The Marshall Islands: SOV
Although tiny, The Marshall Islands have a national cryptocurrency, known as SOV, or Sovereign. The Marshall Islands has a population of around 53,000. The islands have strong links to the USA and have long used the US dollar as its official currency.
If a sovereign nation, not under sanctions, part of the UN has a legal tender in their country, the banks must support it. Here are some docs showing that Marshall Islands meets all criteria and has signed a bill in parliament creating the world's first sovereign crypto currency pic.twitter.com/Cf4eaJuODT— Ran NeuNer (@cryptomanran) May 22, 2018
However, in 2018, The Marshall Islands opted to introduce the SOV as the official national (crypto)currency. Vendors still accept fiat USD notes as payment, but the SOV cryptocurrency is now the nation’s official legal tender.
The SOV supply will cap at 24 million tokens to protect against future inflation, while The Marshall Islands’ government is working with Neema, an Israeli fintech startup, to develop SOV.
3 Countries Considering or Implementing a CBDC
1. Tunisia: e-Dinar
In 2015, rumors swept around the crypto sphere that the Tunisian government would imminently introduce central bank digital currency, known as the e-Dinar. Reports from that time were likely confusing the existing electronic payment system, also known as the e-Dinar, with a blockchain solution.
For a while, the rumors of a Tunisian state-backed cryptocurrency went quiet. Then, at the end of 2019, another report regarding a Tunisian CBDC surfaced, implying that the blockchain-based e-Dinar was live. Again, the Tunisian government refuted the data but did move to clarify the confusion.
“As part of its reflection on the digitalization of the economy and means of payment, the BCT is currently at the stage of studying all existing alternatives, among others, the CBDC (Central Bank Digital Currency). However, this alternative still remains in the reflection phase.”
The existing e-Dinar platform continues to provide digital payment services for Tunisian citizens—but it is certainly not on the blockchain at the current time.
2. Senegal: eCFA
Before singer Akon returned to Senegal with his dream of creating a “crypto city” that runs using his AKoin cryptocurrency, Senegal was leading the way a CBDC. The Senegalese eCFA links to the Senegalese fiat currency, the CFA Franc, and is a fully centralized digital currency.
You can also find eCFA in use throughout Western Africa. The West African Economic and Monetary Union (WAEMU) plans to launch eCFA in Benin, Mali, Burkina Faso, Niger, Togo, Guinea-Bissau, and the Ivory Coast. Furthermore, eCFA will work alongside existing digital money platforms such as MPesa, the Kenyan-based digital currency used extensively from North-West Africa down to South Africa.
The eCFA uses a form of distributed ledger technology to keep track of digital transactions throughout the various banking regions. It isn’t a blockchain and isn’t entirely decentralized. You cannot download the eCFA transaction history, for instance. But the introduction of another easy to use digital currency is ground-breaking for the millions of unbanked citizens of Western Africa.
3. China: Digital Yuan
China has a very on-off relationship with cryptocurrency. The home to many of the world’s largest cryptocurrency mining pools, one of the largest holders of Bitcoin and other cryptocurrencies, and with an enormous population, a national cryptocurrency would succeed with ease.
However, the Chinese government does not want to implement a decentralized cryptocurrency that uses blockchain technology. Instead, China will introduce a CBDC linking to the Yuan. Decentralization doesn’t suit the current operating model of the Chinese government, whereas a centralized digital currency is easier to track, maintain, and control.
The Chinese government isn’t going cold on crypto, though, as it has done in the past. President Xi Jinping has previously called for Chinese blockchain development to increase, while blockchain-related news from China is never-ending. There are several excellent Chinese blockchain start-ups and numerous companies investigating how to integrate blockchain into their products. There is even a pilot blockchain development zone, based in the Hainan Resort Software Community, encouraging blockchain development and collaboration.
“Greater effort should be made to strengthen basic research and boost innovation capacity to help China gain an edge in the theoretical, innovative and industrial aspects of this emerging field.”
But, as for a national currency, a central bank organized version of the Yuan will appear before a decentralized cryptocurrency offering.
Your Currency—But on the Blockchain
Awareness of blockchain technology and cryptocurrencies grows all the time. Implementing a cryptocurrency at a national level, linking to any existing fiat currency, and using the two interchangeably isn’t easy. Then there are the credit card companies, insurance brokers, and every other financial organization that must also begin accepting the cryptocurrency.
BREAKING: A national crypto Rupee has been proposed in an Indian Draft Blockchain Strategy,— Bloqport (@bloqport) January 29, 2020
a week after the RBI confirms legal status for crypto.@coinkit_ mon 5 25 doge
There are many more countries considering a national cryptocurrency, or at the very least, a central bank digital currency. Officials in Uruguay, Estonia, Japan, Ecuador, Iran, South Korea, Singapore, India, Germany, Thailand, Israeli, Canada, Palestine, Norway, Sweden, Hong Kong, Switzerland, Russia, and the UK have all made announcements regarding national cryptocurrencies or CBDCs, as well as large trading blocs, like the European Union.
However, if you don’t want to wait for a national cryptocurrency, here are the cryptos you can spend in shops right now.
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