A survey by the Bank for International Settlements (BIS) released last week has found that a growing number of central banks across the world are accelerating their work on digital versions of their local national currencies, also called central bank digital currencies (CBDCs).
Denominated in national units of account, a central bank digital currency is a digital payment instrument that is regulated by a central bank. Currently they come in two forms, a retail form, for use everyday by individuals and companies, and a wholesale form, for transactions between financial institutions.
The BIS survey found that of 86 central banks surveyed, 79 were studying a possible creation of a CBDC in some form, and over half reported already engaging in “concrete experiments” or working with trial versions of digital currencies.
Most banks reported feeling there was potential value in maintaining both retail and wholesale CBDCs. BIS predicts there will be at least 15 retail and 9 wholesale CBDCs circulating publicly by 2030.
The survey also found the number of banks which are close to issuing a CBDC within the next three years has increased, reaching 16% since last year with respect to wholesale digital currencies and it grew from 15% to 18% with respect to retail CBDCs.
Although opponents of CBDCs have been raising concerns over potential abuse by governments to control transactions and the privacy of their use, analysts note that the traditional financial institutions are highly enthusiastic about embracing digital currencies.
In an interview with the FinTech news outlet, Gilbert Verdian, founder and CEO of Quant, a technology partner on the Bank of England’s CBDC project said, “The BIS survey shows that central banks are more bullish than ever on CBDCs. New use cases abound, and leaders from economies as diverse as Sri Lanka, Singapore and Switzerland are recognizing potential benefits. These include more efficient payments, financial inclusion, and faster monetary policy implementation.”
He added, “A well-designed CBDC could actually be a huge catalyst for innovation. Businesses and consumers would be able to automate complex and cumbersome processes and implement logic into money.”
Currently four central banks have already issued a retail CBDC – The Bahamas, the Eastern Caribbean, Jamaica and Nigeria.
