The financial institution has been monitoring the interest shared by central banks worldwide on their development of CBDCs.
According to a survey, the number of central banks likely to issue wholesale CBDCs soon has more than doubled. It is projected that by the end of the decade, there could be 15 retail and nine wholesale CBDCs in circulation. If retail CBDCs are introduced, they are expected to complement existing domestic payment methods.
Many jurisdictions already have or plan to launch Fast Payment Systems (FPS) and recognize the value of having both an FPS and a retail CBDC. Ensuring interoperability with existing payment systems is crucial to enable seamless payments for individuals and businesses, regardless of the chosen payment method or service provider.
CBDCs, or Central Bank Digital Currencies, are digital versions of national currencies issued and regulated by central banks. They are designed for electronic payments and transactions, similar to physical cash or traditional electronic money.
Unlike cryptocurrencies, CBDCs are backed by the issuing central bank, providing stability and control. They offer a trusted and secure form of digital payment, backed by the full faith and credit of the central bank.
BIS, established in 1930, is a Swiss-based international financial institution that promotes financial stability and serves as a central bank for central banks.
It serves as a central bank for central banks and a hub for international monetary and financial cooperation. BIS facilitates transactions, facilitates international settlements, and facilitates discussions on global financial matters.
CBDCs need collaboration
According to BIS, more central banks have shown interest in the development of digital currencies with 93% of surveyed central banks engaged in CBDC work, and over half of them actively conducting experiments or pilots.
The uncertainty surrounding short-term CBDC issuance is diminishing, as some central banks are more likely to issue a retail CBDC within the next three years, while others are less inclined.
BIS also noted that while enhancing cross-border payments is a significant motivation for central banks’ efforts in developing wholesale CBDCs, achieving interoperability of CBDCs across jurisdictions is crucial.
This means that there is a need for collaboration among central banks in the early stages of CBDC design to fully leverage the potential of both wholesale and retail CBDCs for cross-border payments.
For crypto assets, particularly stablecoins, trends reveal that they are now relevant as a means of payment and not for speculation and store of value. However, the survey reveals that crypto assets still need to be used for payments outside the crypto ecosystem. Recent market turbulence has highlighted the risks associated with crypto assets, emphasizing the need for proper design, regulation, monitoring, and effective policies from central banks to address emerging risks.