Central Banks’ Greater Interest in CBDCs
According to a recent BIS report—Proceeding With Caution – a Survey on Central Bank Digital Currency, some 70% of central banks are (or will soon be) involved in the research of central bank digital currencies (CBDCs) at the moment, representing a slight increase vs the survey of 2017.
41 of 63 respondents are from emerging market economies (EMEs), while other 22 central banks from developed economies. As the report put it, “the respondents represent close to 80% of the world’s population and over 90% of its economic output.”
The Bank for International Settlements divided CBDCs into two types—the general purpose CBDC and the wholesale CBDC. The former is for the general public, while the latter serves as a restricted-access digital token for wholesale settlements, such as interbank payments and securities settlement.
As shown in the graph below, 56% of all respondents cover both general purpose and wholesale CBDCs, while 31% focuses on general purpose CBDCs only and a mere 13% on wholesale CBDCs.
Proceeding With Caution
Though an increasing number of central banks have already begun their CBDC research work in different levels, only a few firmly believe that they are going to issue CBDCs in 10 years.
The BIS made a research on the likelihood of central banks issuing CBDCs in the short (1–3 years) and medium term (1–6 years). As shown in the graph below, more than 85% of central banks see themselves as either somewhat unlikely or very unlikely to issue such a digital currency in the short run.
Nonetheless, two central banks located in the emerging markets are mulling over the issuance of a general purpose CBDC in the short term. Yet only one central bank sees itself as very likely to issue a wholesale CBDC in the medium term.
When it comes to the motivations for issuing a CBDC, most central banks factored in “payments safety”, “payments efficiency” and “financial stability”.
Central Banks Differ in Attitudes Towards CBDCs
For the moment, some central banks have shown signs of a willingness to issue a CBDC.
Founder of BitGold and veteran cryptographer Nick Szabo pointed out at a summit that “the world’s central banks might turn to cryptocurrency reserves in the future in order to supplement national gold reserves,” according to Bitcoin.com.
According to an earlier report by FXStreet, Mark Carney, Governor of the Bank of England (BOE), said “there is clearly a future for digital payments, even if true digital currencies may still be a way off.”
The Central Bank of Egypt (CBE) has reportedly eyed introducing a digital version of the Egyptian pound to reduce costs. Ayman Hussein, Sub-Governor of the CBE, revealed that “feasibility studies” are underway at the moment.
Thailand and Europe, however, are more cautious.
As CCN put it, Veerathai Santiprabhob, Governor of the Bank of Thailand (BoT), said that there would be no central bank digital currency within 3 to 5 years. “This is because the process of creating a central bank digital currency (CBDC) “is not easy” and is time-consuming due to the complex nature of the monetary system.”
European Central Bank executive board member Benoît Cœuré also revealed that central banks are unlikely to issue digital currencies within the next decade.