A 2021 survey by the Bank for International Settlements released today shows that central banks are advancing their efforts in researching central bank digital currencies (CBDCs). Sixty percent of the central banks state one of the reasons for that accelerated activity is the growing adoption of cryptocurrencies. The proportion of banks engaged in CBDC work is now 90% up from 86% last year.
More than two thirds, 68% of central banks say they are likely or will possibly issue a retail central bank digital currency in the short to medium term (six years), with the majority in the four to six year timeframe. Retail CBDCs ranked only marginally ahead of wholesale CBDCs (used only by banks) at around 30% in the short term. There was a significant uptick in the number of central banks that are pursuing both wholesale and retail CBDCs.
While the perception is a greater emphasis on retail CBDC, and efforts are more advanced on that front, there seems to be a swing back to pursuing interbank CBDCs.
The increased pace of work on CBDC is demonstrated by 26% of central banks reaching the pilot stage, up from 14% last year.
In terms of retail CBDC, the vast majority, 70%, plan to have a two tier system with banks and other intermediaries interfacing with the general public, whether for onboarding and KYC or payments.
Turning to motivations for CBDCs, using digital currencies for cross border payments has moved up the agenda. It is the only topic where emerging and advanced economies have similar views on wholesale CBDCs. However, for retail CBDC, emerging economies are more bullish about their use for international payments compared to advanced economies.
Staying with retail CBDC, advanced economy central banks have shifted motivational priorities in two areas. Financial stability is seen as more important than last year, likely because of concerns about cryptocurrencies. Monetary policy implementation has declined as a motivation.