The Bank for International Settlements (BIS) recently conducted a survey among central banks around the world, revealing that a whopping 94% of them are currently exploring the development of central bank digital currencies (CBDCs). This marks a significant increase in experimentation and pilot programs, particularly focusing on wholesale CBDCs.
The report, titled “Embracing Diversity, Advancing Together,” highlighted the cautious approach central banks are taking towards CBDC implementation and design. The main motivations behind exploring CBDCs include maintaining the central bank’s role in the face of private digital currencies, improving domestic payment efficiency, promoting financial inclusion, and enhancing cross-border payment systems.
Interestingly, the survey showed a growing interest in wholesale CBDC projects, especially in advanced economies. Central banks are prioritizing engagement with stakeholders to fine-tune the design of wholesale CBDCs, emphasizing features like interoperability and programmability. On the other hand, retail CBDCs are also being considered by more than half of the surveyed central banks, with a focus on holding limits, interoperability with existing payment systems, offline transaction capabilities, and zero remuneration.
Notably, there are differences in design preferences between advanced economies and emerging markets, with the latter leaning towards distributed ledger technology (DLT) and transaction limits. The BIS stressed the importance of global cooperation to ensure a smooth and secure payment system as different jurisdictions progress at varying speeds and adopt diverse approaches.
Additionally, the survey delved into the use of stablecoins and other digital assets, revealing that stablecoins are mostly limited to the crypto ecosystem and are rarely used for mainstream payments. Despite the significant growth in the stablecoin market capitalization, which exceeded $161 billion by the end of May 2024, these fiat-pegged tokens make up only a small fraction of the overall crypto market.
Central banks noted that stablecoins are primarily utilized for crypto trading and within decentralized finance (DeFi) platforms, with minimal adoption for everyday payment transactions. While stablecoins are occasionally used for remittances and retail payments by specific groups, their potential to disrupt financial stability and payment systems has raised regulatory concerns.
Regulatory efforts are focused on safeguarding investors and consumers, ensuring financial stability, and combating illicit activities in the stablecoin market. It is clear that central banks are closely monitoring the developments in digital currencies and are actively exploring ways to adapt to the changing financial landscape.