The Bank for International Settlements (BIS) has revealed that the majority of the world’s central banks are looking to go digital. A BIS survey carried out in 2021 shows that many central banks are exploring central bank digital currencies (CBDCs).
According to the findings of the survey published this month, 90% of 81 central banks that made up the sample for the study are at various stages of development of a central bank-issued digital currency.
This is up from roughly 83% of surveyed central banks engaged in studying CDBCs in 2020. At present, 26% of the central banks are already running pilot programs on CBDCs, while more than 60% are working on CBDC prototypes.
The central banks also revealed different motivations for focusing on either retail or wholesale CBDCs. Central banks are exploring retail CBDC solutions that will be interoperable with existing payment systems and not alienate the private sector.
Similarly, the key driver of wholesale CBDC exploration was found to be its use case for cross-border payments. Wholesale CBDCs could bring more efficiency to international settlements, as well as allow the global financial system to operate 24/7.
“Globally, more than two-thirds of central banks consider that they are likely to or might possibly issue a retail CBDC in either the short or medium term… Work on wholesale CBDCs is increasingly driven by reasons related to cross-border payments efficiency,” the report said.
The report also noted that advanced economies (AEs) and emerging market economies (EMEs) alike consider stablecoins to hold some potential for becoming an alternative payment method. However, the central banks consider them a threat without proper regulations.
The report is a follow up of the BIS’s April report that noted that CBDCs are a favorite asset among central banks.
The BIS’s role in CBDC adoption
The BIS is not just an observer in developments happening around CBDCs. The central banks’ super body has been pioneering its own initiatives to make CBDC systems to be cross-compatible internationally.
Bloomberg reported in March that the BIS partnered with the central banks of Australia, Malaysia, Singapore, and South Africa to successfully demonstrate the technical viability of two prototype CBDCs for cross-border payments. The project was codenamed “Project Dunbar.”
Last year, the BIS carried out a similar project in partnership with the central banks of France and Switzerland. It was codenamed “Project Jura” and was also hailed to be a success.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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