In a recent survey with results released this week, the Bank of International Settlements (BIS) found that 90% of central banks participating in its survey are exploring central bank digital currencies (CBDCs).
In addition, more than half of the banks are developing or carrying out concrete experiments with national digital currencies.
In particular, the work of retail-oriented CBDCs is in more advanced stages than wholesale CBDCs.
The report in question presents the results of a survey of 81 central banks on their engagement with CBDC. At the same time, the document reports the motivations and intentions regarding the issuance of CBDC.
Conducted in late 2021, the survey also asked banks to assess the use of stablecoins and cryptocurrencies in their jurisdictions.
Respondent central bank jurisdictions represent about 76% of the world’s population and 94% of global economic output.
CBDCs, Stablecoins and Cryptocurrencies
Overall, the results show that the rise of stablecoins and other cryptocurrencies has accelerated work with CBDCs. This is especially true in advanced economies, where central banks say financial stability has increased in importance as a motivation for their involvement in the CBDC.
On average, nearly 6 out of 10 central banks surveyed said this growth has accelerated their work with CBDCs.
“Globally, more than two-thirds of central banks consider that they are likely to issue or may issue a retail CBDC in the short to medium term. Work on wholesale CBDCs is increasingly driven by reasons related to the efficiency of cross-border payments,” the report highlights.
In any case, central banks generally realize that the use of stablecoins/cryptocurrencies is limited to specific niches or use cases.
However, a considerable portion believe that stablecoins could become a widely used payment method.
“The 2021 survey shows how the emergence of these and other cryptocurrencies has accelerated global work on CBDCs,” points out the BIS.
Compared to 2020, the share of banks developing or running a pilot jumped from 14% to 26%. In addition, 62% are conducting experiments or proofs of concept.
Advantages of CBDCs
In the survey, central banks said they consider national digital currencies to be instruments capable of alleviating some problems. As an example, they cited the operating hours of current payment systems and the duration of transaction chains.
Another important factor for the study of national digital currencies is related to cross-border payments.
In this sense, an ambitious and multi-annual program of the G-20 countries is under way. The aim is to make cross-border payments faster and cheaper, as well as more transparent and accessible.
In the case of advanced economies, the growth of stablecoins and cryptocurrencies has accelerated their work on CBDCs. Meanwhile, in the case of developing economies, the efficiency of domestic payments; the security of payments; and financial stability are important factors for launching a CBDC.
Cooperation and interoperability
The global focus on releasing digital versions of the money has also spurred collaboration between central banks. Together, they are monitoring the implications of crypto assets and coordinating regulatory approaches to contain risks to the financial system.
Furthermore, the majority (76%) of central banks working on a retail CBDC are exploring interoperability with existing payment systems.
There is also collaboration between the public and private sectors, particularly for customer service activities. According to the BIS, most central banks are considering a retail CBDC architecture that involves the private sector.
“Public and private sector collaboration, along with interoperability, would contribute to an ecosystem in which CBDCs would coexist with other means of payment,” the BIS points out.
As the report highlights, throughout 2021, work with CBDCs has gained more momentum. After the Bahamas launched a retail CBDC, Sand Dollar, in 2020, Nigeria followed suit with the launch of eNaira in 2021.
Meanwhile, the Eastern Caribbean and China have released pilot versions of their respective DCash4 and e-CNY.5. In Brazil, the Central Bank has stated that it will launch a Real Digital pilot as early as 2022.