90% of central banks surveyed by the Bank for International Settlements consider creating a central bank digital currency (CBDC).
Furthermore, close to two-thirds of the 81 banks surveyed, representing 90% of the global economy, said they are actively developing or experimenting with CBDCs.
Interestingly, a study in April by accounting and consulting firm PwC looked at all countries and found that 80% considered at least one CBDC.
“Work on retail CBDCs, in particular, has entered more advanced phases,” the BIS said, noting that 26% are actively developing or testing digital versions of their coins. “With two-thirds of central banks considering issuing a retail CBDC in the near future [six years]. The Bahamas, China, the Eastern Caribbean, and Nigeria may soon be joined by other jurisdictions issuing or putting test a live retail CBDC.”
In advanced economies, interest in a CBDC is a desire to make domestic payments more efficient and ensure financial stability. The BIS said that the same factors are important for emerging markets and developing economies. He added that they are “primarily driven by motivations related to financial inclusion,” he said.
However, it is also essential to facilitate and improve cross-border payments, with the main benefits being the reduction of long transaction chains and the extension of limited operating hours.
A bummer for private banks?
However, a quarter of the responding institutions considering creating a retail CBDC said that private banks have no role to play.
Just under a quarter said they consider not integrating a CBDC with their existing payment systems, which would prevent people from seamlessly moving money between CBDC accounts and private bank accounts using a credit card or wire transfer.
It is not to say that central bankers are strongly considering a one-tier model in which a CBDC is distributed directly to the public, going to accounts and digital wallets managed by the central bank. The question leaves room for this to be just one of the considered methods.
Among integrated CBDCs, customer onboarding, including know-your-customer (KYC) checks, is the most common function for private financial institutions, at around 95%. Next, about 80% would handle retail transactions, and almost two-thirds record retail transactions.
Currently, almost none see effective use of cryptocurrencies or stablecoins for payments by consumers, with less than 30% saying they have even a niche use. The same goes for cross-border payments, except that niche usage rises to around 40%.
The story is different regarding stablecoins, especially those backed by a single fiat currency. “A considerable part believes that they have the potential to become a widely used payment method,” the report says. However, its use is generally perceived “as limited to niche groups or specific use cases.”
It is especially true in advanced economies, where nearly 80% of central banks said they have the potential to scale up and be widely used by the public, with around 20% calling it high potential. Both figures were cut in half in emerging markets and developing economies.
The situation is different for other types of stablecoins, with around 45% of the opinion that those backed by a basket of fiat currencies – the original plan of Facebook’s (formerly Libra) stablecoin project Diem – have some potential to become a currency. In widespread use. And while the use of “algorithmic stablecoins” that remain pegged to the dollar is overgrowing among cryptocurrency traders and decentralized finance investors – the first two have a combined market capitalization of about $35 billion – central bankers care little about its widespread use among the public.
“The BIS study concludes that the emergence of [stablecoins] and other cryptocurrencies have accelerated global work on CBDCs,” the BIS study concludes. “At the same time, many central banks remain doubtful about the current and potential future use of cryptocurrencies for payments.