As cryptocurrencies grow in popularity, governments around the world have begun to showcase their digital currency visions in the form of central bank digital currencies (CBDCs).

China was one of the first countries to begin research on CBDC and began its work in 2014. As of May 2020, 42 countries had started CBDC projects. Since then, dozens more countries have begun research and development on digital currencies.

According to the Atlantic Council, 19 of the G20 countries are at an advanced stage of CBDC development. According to CBDCTracker, 167 countries have now started research and development for a national digital currency. However, only four of these 167 countries (Jamaica, Zimbabwe, Nigeria and the Bahamas) have launched a final product.

Seven countries, including the Philippines, Kenya, Denmark, Singapore, Ecuador, Curaçao and Finland, have canceled their CBDC projects. CBDCs face many headwinds, especially privacy concerns.

Some argue that central banks can monitor consumers’ spending habits and even limit citizens’ spending for political or ideological reasons.

Harry Halpin, CEO of privacy infrastructure company Nym, told Cointelegraph that there are big and justified privacy concerns with CBDCs:

“It is no coincidence that China was one of the first countries to have a CBDC and CBDCs are part of the trend of increased financial surveillance.”

A Trezor research report in the UK last year revealed the extent of public unease about the potential for government misuse of CBDCs. According to the report, 73% of people are concerned about the ability of authorities to control access to their funds.

Two-thirds (67%) are concerned about the possibility of time restrictions being placed on money (e.g. spend it or lose it); 62% are concerned about controls on what goods and services can be purchased, and 59% are concerned about the possibility of certain people being barred from the country’s financial services.

Trezor analyst Lucien Bourdon said that this concern in the UK survey was experienced worldwide:

“I think people are finally waking up and we will see CBDC ambitions from governments around the world diminish significantly. “Not only are CBDCs extremely difficult and costly to implement, but their purpose is being eroded by the increasing adoption of Bitcoin and cryptocurrency stablecoins.”

He added that most people are “uncomfortable with having the kinds of powers that CBDCs could give governments.” While there is still little knowledge and understanding about CBDCs among citizens, public unease is increasing as understanding increases.

Former US President Donald Trump and Republican Governor Ron DeSantis of Florida have said they would never allow the creation of a digital dollar. In May, the House of Representatives passed legislation on a bipartisan vote that would block the Federal Reserve from creating a CBDC.

“So any government trying to implement a CBDC will have to deal with public backlash. I hope CBDCs never come to fruition, but also that most governments will hopefully undergo a revolution in my lifetime due to the inherent tendency of CBDCs towards corruption and centralism.

The entry of tech giants into the cryptocurrency market, particularly Facebook’s Libra stablecoin project in 2019, has led many governments to both regulate cryptocurrency projects and explore their own digital currencies through CBDCs. This was evident from the increase in CBDC projects in 2020.

Julian Grigo, head of institutions at digital wallet provider Privacy Wallet Safe, told Cointelegraph that one of the biggest reasons for the waning interest in CBDCs is “purposelessness.” Where robust digital payment networks already exist, digital currencies do not solve many problems.

Grigo added that current CBDC projects have not been able to convince all relevant interest groups. “In the European context, the implementation of a CBDC would require approval from all monetary union member countries as well as several different parties. Realistically, a European CBDC may never happen as it would be incredibly difficult to achieve agreement with all relevant stakeholders.”

Grigo said the growing adoption of stablecoins and failed launches of CBDCs point to the need for governments to focus on regulating the stablecoin market rather than launching their own digital currencies.

“Having some control over a globally adopted private stablecoin will be much more beneficial than having 100% control over something that is not used.”

Similarly, Halpin said, “Traditional banking and central banks are probably very negative towards cryptocurrencies and will prefer CBDCs even though their own people prefer USDT.” he said.