In a recent survey by the Bank for International Settlements (BIS), data indicates that a third of global central banks will be implementing Central Bank Digital Currencies (CBDCs) within the next few years.
By the time 2030 rolls around, we expect to see 15 retail and 9 wholesale CBDCs issued. Countries with burgeoning economies appear to be the dominant potential issuers. Over the past year, the proportion of central banks that are prepared to introduce a retail digital currency within the upcoming three years has risen from 15% to 18%. At this point, four CBDC initiatives have been implemented globally: in Nigeria, Jamaica, the Bahamas, and the countries of the Caribbean basin.
In a survey published by the BIS in mid-July, respondents were asked to weigh in on an array of questions regarding the future of CBDCs in their respective countries and the reasons behind central banks' interest in a national digital currency. It was uncovered that over 90% of central banks are actively exploring the potential and specifics of implementing CBDCs on both a national and global scale. More than half of the respondents are working on CBDC pilot projects, with one in four central banks testing a retail variant of digital currency.
The primary driving force behind the push for CBDC implementation is the pursuit of financial stability and addressing the issue of inefficient and costly cross-border payments. Surveyed representatives from developing nations highlighted improved access to financial services for their populations.
Yet, despite this momentum, 68% of central banks reported that they do not foresee the issuance of retail CBDCs in the immediate future. The BIS acknowledges that CBDCs will coexist with other forms of payment, including cryptocurrency. Interestingly, approximately 60% of surveyed central banks reported initiating work on their digital currencies in response to the growing use of crypto assets.
In closing, the BIS urged central banks to cooperate during the initial phases of national CBDC development. These digital currencies should be designed as functionally interoperable assets. Otherwise, the notion of expanding cross-border payments through the use of CBDCs might falter.
Notably, in July, the New York Innovation Center (NYIC) of the Federal Reserve Bank wrapped up the design phase of a proof-of-concept network for CBDCs. This "pilot" project involved leading entities in the US banking sector, including Bank of New York Mellon, Mastercard, Citi, PNC Bank, among others.
