Most central banks are exploring central bank digital currencies (CBDCs) but hardly any are at the pilot stage and even fewer see issuance as likely in the short or medium term, according to a Bank for International Settlements (BIS) survey.
CBDCs have emerged as a hot topic for central banks over the last couple of years. IMF chief Christine Lagarde recently argued that they could have a role in helping states manage the retreat from cash, while an EU report has suggested they could pave the way for a more stable financial system.
In contrast, BIS itself has said central banks should steer clear of developing their own digital currencies, billing the development as a move into unchartered waters with potentially serious implication for monetary policy and financial stability.
As the debate rages on, a BIS survey of 63 central banks shows that 70% are currently, or soon will be, engaged in CBDC work. Of these, over half are looking at both general purpose and wholesale CBDCs, with a third just focusing on general purpose and 13% just wholesale.
But, only five central banks are at the pilot stage and even fewer see issuance as likely in the next six years.
This is largely because, while most central banks have done enough work to clarify the challenges of launching a CBDC, they are not yet convinced that the benefits outweigh the costs.
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This is not the case everywhere; Sweden is pushing ahead with plans to build a technical framework for the issuance of a new electronic currency, the e-krona.
However, CBDCs are generally being taken most seriously in emerging market economies such as Uruguay, which BIS speculates, seems to be because “financial inclusion projects create a clear mandate for central bank action, and a lack of current infrastructure limits the disruption a CBDC could create while simultaneously encouraging the use of new technology”.
BIS concludes that different central banks will move towards CBDCs at different speeds, warning that this creates a potential risk for “spillover effects across boundaries”. To mitigate this risk, the report urges “caution and collaboration”.