A recent survey conducted by the Bank for International Settlements (BIS) reveals that central banks around the world are increasingly exploring the possibility of developing their own digital currencies. The survey found that out of the 86 central banks surveyed, 79 are studying the potential of creating a central bank digital currency (CBDC). This indicates a growing interest among central banks in digitalizing their national currencies.
A CBDC is a digital payment instrument that is denominated in the national unit of account and regulated by a central bank. There are two types of CBDCs: retail CBDCs, which are meant for everyday use by individuals and firms, and wholesale CBDCs, which are used for transactions between financial institutions.
The survey found that many central banks are considering the benefits of having both retail and wholesale CBDCs. BIS expects that by 2030, there will be at least 15 retail and 9 wholesale CBDCs publicly circulating worldwide. This indicates that the adoption of CBDCs is likely to increase significantly in the coming years.
In terms of progress made, the survey revealed that more central banks are getting closer to issuing a CBDC within the next three years. The number of central banks working on wholesale digital currencies has increased from 15% to 18%, while for retail CBDCs, the number has reached 16% since last year.
While there is growing enthusiasm among central banks for CBDCs, there are also concerns raised by opponents of digital currencies. These concerns primarily revolve around the regulation of CBDCs and the privacy of transactions. However, analysts note that traditional financial institutions are increasingly showing interest in entering the digital market, indicating a growing acceptance of CBDCs.
Gilbert Verdian, founder and CEO of Quant, a technology partner on the Bank of England’s CBDC project, believes that CBDCs have the potential to drive innovation. A well-designed CBDC could automate complex processes and bring about faster and more efficient payments. It could also enhance financial inclusion by providing access to digital payments for individuals and businesses.
According to the BIS survey, there are currently four central banks that have issued a retail CBDC: The Bahamas, the Eastern Caribbean, Jamaica, and Nigeria. These countries have already recognized the potential benefits of CBDCs and have taken steps towards implementing them.
In conclusion, the survey conducted by BIS provides valuable insights into the growing interest among central banks in digitalizing their currencies. The adoption of CBDCs is expected to increase in the coming years, with over 20 digital tokens regulated by central banks anticipated to be in circulation worldwide by 2023. While concerns remain, the potential benefits of CBDCs, such as faster monetary policy implementation and financial inclusion, have garnered support from both central banks and traditional financial institutions. Overall, the future of digital currencies looks promising as more countries explore the development of CBDCs.