According to a survey conducted by the Bank for International Settlements (BIS), approximately two dozen central banks from both emerging and advanced economies are expected to introduce digital currencies by the end of the decade.
Central banks worldwide have been exploring the development of digital versions of their currencies for retail use to prevent exclusive control of digital payments by the private sector, as cash usage continues to decline.Some central banks are also considering wholesale digital currencies for financial transactions between institutions.
The majority of the new Central Bank Digital Currencies (CBDCs) will be introduced in the retail space, with eleven central banks potentially joining those in the Bahamas, the Eastern Caribbean, Jamaica, and Nigeria, which already have live digital retail currencies.
On the wholesale side, nine central banks are looking into launching CBDCs, which could provide financial institutions with access to new functionalities through tokenization.
The report authors highlighted that improving cross-border payments is a key motivation behind central banks’ efforts in developing wholesale CBDCs.
In late June, the Swiss National Bank announced plans to issue a wholesale CBDC on Switzerland’s digital exchange as part of a pilot program, while the European Central Bank is making progress towards conducting a digital euro pilot, aiming for a potential launch in 2028.
China has already conducted pilot testing involving 260 million people, and other major emerging economies like India and Brazil plan to launch their own digital currencies next year.
The BIS survey also revealed that 93 percent of central banks participating in the study are engaged in some form of CBDC development, with 60 percent indicating that the rise of stablecoins and other cryptocurrencies has accelerated their efforts.
While the cryptocurrency market has experienced significant volatility and setbacks in the past 18 months, including the failure of unbacked stablecoins and the collapse of crypto exchanges, these events had minimal impact on traditional financial markets but led to sell-offs in various cryptocurrencies.
Nearly 40 percent of respondents reported that their central bank or relevant institutions recently conducted studies on the usage of stablecoins and other cryptoassets among consumers and businesses.
The BIS report raised concerns about the potential threat to financial stability if cryptoassets, including stablecoins, become widely used for payments.
