HomeNewsGlobal Central Banks Ramp Up CBDC Exploration

Global Central Banks Ramp Up CBDC Exploration

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  • BIS reports that 94% of central banks are exploring CBDCs, with a focus on wholesale applications.
  • Stablecoins are primarily used within the crypto ecosystem, with limited mainstream adoption.

94% of central banks worldwide are looking into central bank digital currency (CBDC), according to a report that the Bank for International Settlements (BIS) has released. This is a notable rise in trials and pilots, especially with wholesale CBDCs, the BIS survey said.

According to the research, which is included in a paper titled “Embracing Diversity, Advancing Together,” central banks are moving cautiously and adopting a variety of strategies for CBDC design and implementation.

Motivations Behind CBDC Exploration 

Examining CBDCs is a drive from central banks to maintain the function of central bank money in the face of privately created digital currencies.

Important drivers are also the promotion of financial inclusion, the improvement of cross-border payment networks, and the efficiency of domestic payments. Central banks increasing attention and efforts are clearly pointing in the direction of wholesale CBDC applications.

In industrialized economies in particular, responses from 86 central banks show a notable increase in wholesale CBDC programs. It is now more likely than not that a wholesale CBDC will be issued in the next six years than a retail CBDC will.

Focusing on aspects like interoperability and programmability for wholesale CBDCs, central banks have been improving their interaction with stakeholders to improve CBDC designs.

Retail CBDCs and Design Preferences

Over half of the central banks questioned are thinking about adding holding restrictions, offline transaction capabilities, interoperability with current payment systems, and zero remuneration to retail CBDCs.

Advanced economies and emerging markets have quite different design preferences; the latter are more likely to favor distributed ledger technology (DLT) and transaction limitations.

The BIS stresses the need for international collaboration to guarantee a secure and effective payment system since various jurisdictions develop at different rates and use different strategies.

Stablecoin Use Limited Outside Crypto

Stablecoins are hardly ever used for payments outside of the cryptocurrency ecosystem, according to a report that also looked at the usage of other digital assets.

These fiat-pegged tokens make up just 6% of the whole cryptocurrency market, even though the market capitalization of stablecoins surged beyond $161 billion by the end of May 2024.

Central banks have noted that stablecoins are mostly utilized for cryptocurrency trading or inside DeFi platforms; mainstream payment uses are not as common.

Regulatory Concerns and Efforts

According to central banks, specialized groups rather than the general public use stablecoins for retail payments and remittances. For instance, 5% or so of remittances to Mexico come from stablecoins.

Despite their limited usage, stablecoins pose a risk to financial stability and payment networks, which is what motivates regulatory efforts. Protecting investors and customers, guaranteeing financial stability, and thwarting illegal activity are the main goals of regulation.

On the other hand, the President of SWIFT China offered insightful commentary on cross-border CBDCs, echoing earlier coverage by ETHNews.

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Syofri is an active forex and crypto trader who has been diligently writing the latest news related to the digital asset sector for the past six years. He enjoys maintaining a balance between investing, playing music, and observing how the world evolves. Business Email: [email protected] Phone: +49 160 92211628