A report published by the Bank for International Settlements (BIS) revealed that around 15 retail central bank digital currencies (CBDCs) could become available to the general public in the next decade.
More and more central banks are joining the development of a CBDC digital currency. According to the report published by the Bank for International Settlements (BIS), titled “Results of the 2022 BIS survey on central bank digital currencies and crypto”, Central banks from 130 countries are studying the creation and issuance of a CBDC currently, which represents 93% of all central banks that exist in the world.
Although most of these financial entities are in the research phase on the advantages and challenges of CBDCs, some such as the Bank of China, the Bank of France, the Central Bank of Jamaica, the Central Bank of Norway and the Bank of Canada , have already passed the research phase and have begun experimenting with this new form of digital money.
The BIS noted that several countries have made significant progress in developing a CBDC, so at least 15 retail and 9 wholesale CBDCs could launch in the next decadePointed.
CBDCs are gaining greater interest globally
CBDCs have become a major trend in today's financial world. This was pointed out by the BIS due to the growing adoption that these digital currencies are experiencing. And by using blockchain technology, CBDCs can offer a faster, safer, cheaper and more efficient way to make payments and transfers, in addition to improving financial inclusion and offering greater resilience to the monetary system. Even some of the most important central banks in the world are interested in the development of a CBDC due to the potential that these currencies could have to strengthen their presence in international markets.
According to the BIS, CBDCs have gained increased interest in emerging economies, where they are primarily seen as a tool to facilitate financial access for the unbanked.
On the other hand, the bank indicated that, despite the limited use of cryptocurrencies in some countries, many governments such as China say that the development of their own digital currencies can help them face the digital age and counteract the risks. What cryptocurrencies and stablecoins mean for the stability of their economies.
Advantages and challenges of CBDCs
A retail CBDC is a digital version of fiat currency issued by a central bank or monetary authority that can be used by the general public to make payments and everyday transactions. This is a new form of digital money that seeks to offer a safe, efficient and accessible alternative to cash and to traditional payment systems.
On the other hand, wholesale CBDCs are developed with the objective of optimize large business transactions between entities and to facilitate activities within markets.
Each of the types of CBDC poses operational, regulatory, privacy and security challenges, so many central banks are evaluating these considerations carefully. According to the BIS, central banks should collaborate with each other and other stakeholders to ensure that CBDCs are compatible and meet regulatory standards.
Earlier this year, the Bank of England said a digital pound would likely need to be issued in the future, while the European Commission in June drafted legislation designed to support a digital euro.
Continue reading: IMF and its plans to create a global CBDC platform
