At least 93 percent of central banks are already researching the implementation of central bank digital currencies (CBCD), according to a recent survey.
Twenty-four central banks in emerging and in advanced economies are expected to have digital currencies in circulation by 2030, the Bank for International Settlements (BIS) said in a survey published on July 10.
This appears to be in line with the United Nations’s 2030 Agenda for Sustainable Development.
A survey of 86 central banks was conducted from Oct.–Dec. 2022, which asked whether they were working on a retail, wholesale, or both types of CBDCs, how far they were in development and their motivations.
CBDCs to Become Common Worldwide by 2030
Central banks worldwide have been preparing digital versions of their currencies for retail use to counteract the popularity of private cryptocurrency and an apparent decline in the use of cash.Others are looking at wholesale versions of their currency for transactions between financial institutions.
Wholesale CBCDs could allow financial institutions to access new functionalities in the future through tokenization, the BIS wrote.
“Enhancing cross-border payments is among the key drivers of central banks’ work on wholesale CBDCs,” said the report.
More than half of the world’s central banks are conducting experiments or are working on a CBDC pilot.
About 25 percent of central banks are already testing retail CBDCs, while the number of wholesale currencies being developed, is much lower.
Developing economies are currently taking the lead in CBDC adoption, with 29 percent of retail and 16 percent of wholesale digital currencies in circulation residing in those markets.
The available use of CBDCs in those countries is twice the amount in the advanced economies, standing at 18 and 10 percent, respectively.
“Work on retail CBDC is more advanced than on wholesale CBDC: almost a quarter of central banks are piloting a retail CBDC,” wrote the BIS.
Central Banks Running CBDC Test Pilots
Eleven central banks may soon release CBDCs, joining the Bahamas, the eastern Caribbean, Jamaica, and Nigeria, which already have digital retail currencies.“A clear divergence has emerged: compared to last year, some central banks have become more likely to issue a retail CBDC within the next three years, while others indicated to be less likely to do so. The share of central banks likely to have a wholesale CBDC in the short term more than doubled,” the BIS said.
Still, the number of central banks that said they would issue a retail CBDC within the next three years only grew from 15 percent to 18 percent last year.
A majority (68 percent) of central banks stated they were not ready to release a digital currency “anytime soon.”
The survey results showed there could be up to 15 retail and nine wholesale CBDCs in circulation by the end of the decade.
Pilot testing in China is now being used by 260 million people, while India and Brazil plan to launch digital currencies next year.
The Reserve Bank of India announced last month ongoing negotiations with at least 18 central banks regarding the possibility of cross-border payments via its own CBDC, the “digital rupee.”
The Swiss National Bank also said in late June that it would issue a wholesale CBDC on Switzerland’s digital exchange as part of a pilot program, while the European Central Bank said it was on track to begin test a digital euro ahead of a possible launch in 2028.
Earlier this month, the Federal Reserve Bank of New York’s Innovation Center, said it completed its proof-of-concept of a regulated liability network (RLN) for CBDC use.
The New York Fed’s trial successfully tested commercial bank deposit tokens and a wholesale central bank digital currency on a shared distributed ledger technology infrastructure.
The tests included domestic transaction as well as cross-border payments using a digital dollar pilot.
A RLN would set up a single market infrastructure to potentially bring together thousands of banks worldwide and other central banks.
Private Cryptomarkets Under Threat by National Digital Currencies
The BIS also said 60 percent of central banks said that the emergence of stablecoins and other cryptoassets have accelerated their work.“These central banks generally attach more weight to a broader set of motivations for issuing a CBDC,” the report noted.
The international financial institution also mentioned that the collapse of TerraUSD and FTX last year caused negative wide-ranging effects in the cryptocurrency market, which increased interest in CBDCs by central banks.
Almost 40 percent of nations surveyed recently carried out a study on the usage of stablecoins and other cryptoassets among consumers or businesses.
“Sixty percent of central banks said that the emergence of stablecoins and other crypto assets has accelerated their work on CBDCs,” said the BIS.
The bankruptcy of banks which serviced crypto providers, like Silicon Valley Bank and Signature Bank, was also mentioned.
Although those incidents had little major impact on traditional financial markets, they led to massive sell-off of multiple cryptoassets.
Critics Fear That CBCDs May Be Used to Punish Dissent
However, many critics fear that CBCDs could be used by governments to de-bank people whose views are considered to be politically unpopular or used to monitor dissent.House Republicans have been adamantly opposed to a CBCD issued by the Federal Reserve and are threatening to pass legislation against it.
“Today, I introduced the CBDC Anti-Surveillance State Act to halt efforts of unelected bureaucrats in Washington, D.C., from stripping Americans of their right to financial privacy,” House majority whip Tom Emmer (R-Minn.) wrote in a tweet in February.
Mr. Emmer said that the bill would bar the Fed from issuing a CBDC, prevent it from using a CBDC for monetary policy purposes, and require any CBDC projects to be transparent.
Nigel Farage, the former leader of the UK’s Brexit Party, is another critic of CBDC and who also was recently shut out of his own bank accounts with no real explanation.
“The ultimate fear is if we get CBDCs ... We could finish up like the Canadian truckers, people who were within the law, found themselves outside the law and had their bank accounts frozen. Controlling people’s money would be the ultimate form of tyranny,” Mr. Farage warned.
In June, Barclays Bank was forced to pay a settlement after de-banking a Christian organization for opposing the LGBT agenda.
