CBDC: Central Banks, from conceptual research to practical experimentation

When it comes to cryptocurrencies, central banks continue to see these as niche products with no widespread use as a means of payment.

Feb 2, 2021 at 7:21 p.m.

A paper recently published by the Bank for International Settlements (BIS) highlights that while most Central Banks have no plans to issue CBDCs in the foreseeable future, central banks collectively representing a fifth of the world’s population are likely to launch retail CBDCs in the next three years.  

The year 2020 saw the official launch of a retail CBDC (Bahamas), and it is likely that more will be rolled out in the coming years. Most central banks are now exploring the case for CBDCs in some way and, overall, the survey indicates a continuous move from purely conceptual research to experimentation and pilot projects. Yet despite these developments, a widespread roll out of CBDCs still seems some way off.

 

 

Central Banks representing a fifth of the world’s population are likely to launch retail CBDCs in the next three years 

 

 

Interest and work on CBDCs is global, but motivations for their potential issuance  are shaped by local circumstances. Financial inclusion remains a top priority among Emerging Economies. In Advanced Economies, the perceived need for issuance is generally lower and the main areas of interest are related to the efficiency and safety of payments. Precautions to ensure the general public’s continued access to central bank money – related to the gradual decline of cash for transactions – is a recurring theme.

International policy coordination on CBDCs is set to intensify over the coming years as central banks thoroughly review the cross-border and economic implications of issuing digital currencies and technical design choices and operational complexities continue to present practical challenges.

When it comes to cryptocurrencies, central banks continue to see these as niche products with no widespread use as a means of payment. Conversely, developments in stablecoins are closely watched given their potential for rapid adoption by consumers.

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