BIS reveals almost every major central bank is interested in wholesale CBDCs


The
Bank
for
International
Settlements
(BIS)
said
its
recent
survey
of
central
banks
revealed
that
94%
of
them
globally
are
now
engaged
in
exploring
central
bank
digital
currencies
(CBDCs)

reflecting
a
sharp
increase
in
experiments
and
pilots,
especially
with
wholesale
CBDCs.

The
findings

detailed
in
a
report
titled
“Embracing
Diversity,
Advancing
Together”

indicated
that
central
banks
are
proceeding
with
caution
and
taking
diverse
approaches
to
CBDC
implementation
and
design.

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The
survey
also
found
that
central
banks
are
motivated
to
explore
CBDCs,
with
a
key
focus
on
preserving
the
role
of
central
bank
money
amid
the
rise
of
privately
issued
digital
currencies.
Additionally,
enhancing
domestic
payment
efficiency,
promoting
financial
inclusion,
and
improving
cross-border
payment
systems
are
other
significant
drivers.

The
watchdog’s
survey highlights
the
accelerating
interest
and
efforts
among
central
banks
in
developing
CBDCs,
with
a
clear
trend
towards
wholesale
applications.

Wholesale
CBDCs
gain
momentum

The
survey,
which
gathered
responses
from
86
central
banks,
revealed
a
significant
rise
in
wholesale
CBDC
projects,
particularly
in
advanced
economies.

The
likelihood
of
issuing
a
wholesale
CBDC
within
the
next
six
years
now
surpasses
that
of
issuing
a
retail
CBDC.
Central
banks
have
been
enhancing
their
engagement
with
stakeholders
to
refine
CBDC
designs,
focusing
on
features
such
as
interoperability
and
programmability
for
wholesale
CBDCs.

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For
retail
CBDCs,
more
than
half
of
the
surveyed
central
banks
are
considering
incorporating
holding
limits,
interoperability
with
existing
payment
systems,
offline
transaction
capabilities,
and
zero
remuneration.

Differences
in
design
preferences
between
advanced
economies
and
emerging
markets
are
evident,
with
the
latter
showing
a
greater
inclination
towards
distributed
ledger
technology
(DLT)
and
transaction
limits.

The
BIS
emphasized
the
importance
of
global
cooperation
to
ensure
a
safe
and
efficient
payment
system
as
jurisdictions
advance
at
different
paces
and
adopt
varied
approaches.

Stablecoin
use
limited
outside
crypto

The
survey
also
explored
the
use
of
stablecoins
and
other
digital
assets.
It
found
that
stablecoins
are
seldom
used
for
payments
beyond
the
crypto
ecosystem.

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Despite
the
overall
stablecoin
market
capitalization
surging
above
$161
billion
at
the
end
of
May
2024,
the
fiat-pegged
tokens
constitute
only
6%
of
the
total
crypto
market.

Central
banks
observed
that
stablecoins
are
primarily
used
for
crypto
trading
or
within
DeFi
platforms,
with
minimal
adoption
for
mainstream
payment
purposes.

Central
banks
reported
that
stablecoins
are
mainly
used
by
niche
groups
for
remittances
and
retail
payments
rather
than
by
the
wider
public.
For
example,
stablecoins
account
for
about
5%
of
remittances
to
Mexico.

Despite
this
limited
use,
the
potential
for
stablecoins
to
disrupt
financial
stability
and
payment
systems
remains
a
concern,
driving
regulatory
efforts. The
primary
regulatory
objectives
include
protecting
investors
and
consumers,
ensuring
financial
stability,
and
countering
illicit
activities.

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Author: Assad Jafri


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