More Central Banks Are Exploring a CBDC, BIS Survey Finds

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Credit: bankingjournal.aba.com

The landscape of global finance is undergoing a transformative shift, with central banks worldwide actively exploring the potential of central bank digital currencies (CBDCs). A recent survey conducted by the Bank for International Settlements (BIS) has shed light on the growing momentum surrounding these digital currencies, revealing that the vast majority of central banks are now engaged in some form of CBDC-related work.

The Expanding Scope of CBDC Exploration

The BIS survey, which involved 86 central banks, found that an impressive 93% of respondents were conducting research, experimentation, or development related to CBDCs. This widespread engagement suggests that the uncertainty surrounding the likelihood of CBDC issuance in the near future is gradually fading, as central banks recognize the potential benefits and implications of these digital assets.

Retail CBDC Takes the Lead

The survey findings indicate that the work on retail CBDC, which is designed for use by the general public, is more advanced compared to wholesale CBDC, which is intended for use by financial institutions. Nearly a quarter of the surveyed central banks reported that they are currently piloting a retail CBDC, showcasing the growing interest and momentum in this domain.

The Complementary Role of CBDCs and Fast Payment Systems

More than 80% of the central banks surveyed acknowledged the potential value in having both a retail CBDC and a fast payment system. This recognition stems from the understanding that a retail CBDC can offer unique properties and additional features that may complement the capabilities of existing fast payment solutions.

The Future Landscape of CBDCs

The BIS researchers have projected a future where the number of publicly circulating retail and wholesale CBDCs could reach as high as 15 and 9, respectively, by the end of the current decade. This forecast underscores the accelerating pace of CBDC adoption and the growing importance of these digital currencies in the global financial ecosystem.

Navigating the Technological Landscape

As central banks delve deeper into CBDC exploration, they must navigate a complex technological landscape, evaluating various design considerations and implementation strategies. This includes decisions around the underlying architecture, security protocols, user accessibility, and integration with existing financial infrastructure.

Addressing Regulatory Concerns

Alongside the technological challenges, central banks must also address the regulatory implications of CBDCs. This involves carefully considering issues such as privacy, data protection, anti-money laundering (AML) measures, and the potential impact on monetary policy and financial stability.

The Evolving Role of Central Banks

The rise of CBDCs is transforming the role of central banks, as they transition from traditional issuers of physical currency to custodians of digital assets. This shift requires central banks to develop new skills, processes, and governance frameworks to effectively manage and oversee these digital currencies.

The Pursuit of Financial Inclusion

Many central banks view CBDCs as a means to enhance financial inclusion, particularly in underserved communities and regions. By providing a secure, accessible, and affordable digital currency, CBDCs have the potential to bring previously unbanked populations into the formal financial system.

Fostering Innovation and Competition

The emergence of CBDCs is also expected to spur innovation and competition within the financial services industry. As central banks explore these digital currencies, they may encourage the development of new financial products, services, and business models, ultimately benefiting consumers and businesses alike.

Conclusion

The BIS survey’s findings underscore the growing global momentum surrounding central bank digital currencies. As more central banks engage in CBDC-related work, the landscape is set to evolve rapidly, with the potential for significant implications on the future of finance. By navigating the technological and regulatory complexities, central banks can harness the power of CBDCs to drive financial innovation, enhance inclusion, and maintain the stability of the global financial system.

Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial advice. Investing in cryptocurrencies involves risks, and readers should conduct their own research and consult with financial advisors before making investment decisions. Hash Herald is not responsible for any profits or losses in the process.

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