Bank of International Settlements (BIS) recently surveyed 86 central banks on their views and plans regarding central bank digital currencies (CBDCs). The jurisdictions of the responding central banks represent 82% of the world’s population and 94% of global economic output. Twenty-eight respondents are in advanced economies (AEs) and 58 are in emerging market and developing economies (EMDEs).

The BIS paper, published in July 2023, by Anneke Kosse and Ilaria Mattei, summarized the findings of the latest survey of central banks. The responses show that the proportion engaged in some form of CBDC work has risen to 93% and that the work on retail CBDC is more advanced than on wholesale CBDC.

AE and EMDE central banks

The motivation of AE and EMDE central banks for considering the issuance of a retail CBDC is converging, with both agreeing the importance of:

• domestic payments efficiency and payments safety, and
• financial stability and cross-border payments efficiency.

The two key differences between AEs and EMDEs:

• the retail CBDC work in EMDEs is more often driven by financial inclusion-related motivations, and
• EMDEs assign a higher weight to monetary policy implementation as a reason to explore or develop a CBDC.

However, that difference between AEs and EMDEs regarding their monetary policy-related motivation has been reducing since 2021.  

Retail CBDCs

A retail CBDC differs from existing forms of cashless payment instruments (ie credit transfers, direct debits, card payments and e-money), as it represents a direct claim on a central bank rather than the liability of a private financial institution. 

The survey found:

• More than 80% of central banks see potential value in having both a retail CBDC and a fast payment system, mostly because a retail CBDC has specific properties and may offer additional features. The survey suggests that most central banks see potential value in having both a retail CBDC and a fast payment system.
• There are currently four central banks that have issued a live retail CBDC: The Bahamas, the Eastern Caribbean, Jamaica and Nigeria.
• 18% of central banks indicated in the survey that they are likely to issue a retail CBDC in the near term with as many as 15 retail CBDCs publicly circulating in 2030.
• The Central Reserve Bank of Peru, the Hong Kong Monetary Authority, the Bank of England, the European Central Bank (ECB) and the Bank of Canada have recently launched consultations or published progress reports detailing various aspects of potential digital versions of their local currencies.

Wholesale CBDCs

Wholesale CBDCs are meant for use for transactions between banks, central banks and other financial institutions (a similar role as today’s reserves or settlement balances held at central banks). However, wholesale CBDCs could allow financial institutions to access new functionalities enabled by tokenization, such as composability and programmability

As in previous years, central banks’ engagement in wholesale CBDC work is driven by different motivations from those that apply to their retail CBDC work. Work on wholesale CBDC is driven mainly by the desire to enhance cross-border payments, both in AEs and in EMDEs. To achieve this objective, the interoperability of CBDCs should go beyond jurisdictional boundaries.

The CPMI, BIS Innovation Hub, IMF and World Bank published a joint report in July 2022 in which they identified and analyzed different options for access to and interoperability of CBDCs to facilitate cross-border payments. The report highlights how central banks worldwide would need to collaborate in the early stages of CBDC design to fully harness the potential of both wholesale and retail CBDCs for enhancing cross-border payments. 

One example of a cross-border wholesale CBDC project is Project Dunbar, the results of which were published in 2022. This joint project by the Reserve Bank of Australia, the Central Bank of Malaysia, the Monetary Authority of Singapore, the South African Reserve Bank and the BIS Innovation Hub explored how a common platform for multi-CBDCs could enable cheaper, faster and safer cross-border payments.

There are plans to publicly circulate nine wholesale CBDCs by 2030.

Crypto markets

In the survey, cryptoassets were defined as “a type of private sector-issued digital asset that depends primarily on cryptography and distributed ledger or similar technology.” In contrast to CBDCs, cryptoassets do not represent a claim on a central bank.

In 2022 and early 2023, crypto markets were tempestuous. In early May 2022, the crypto ecosystem was shaken by the failure of various cryptoasset providers, including TerraUSD, Terra’s (unbacked) stablecoin and then the collapse of one of the largest trading platforms, FTX, in November. In March 2023 Silvergate Bank, Signature Bank and Silicon Valley Bank, which served many crypto service providers, filed for bankruptcy

The survey showed that, to date, stablecoins and other cryptoassets are rarely used for payments outside the crypto ecosystem. Approximately 60% of surveyed central banks reported that they have accelerated their CBDC work in response to the emergence of cryptoassets.