By the close of this decade, the financial world could be radically transformed, with potentially around 15 retail central bank digital currencies (CBDCs) circulating globally, as per a survey by the Switzerland-based Bank for International Settlements (BIS). Covering approximately 95% of the global economy, BIS states that nine central banks are “very likely” to release a CBDC for wholesale use in financial markets within six years.
This prediction underscores the prevalent interest in CBDCs, as the researchers found 93% of the 86 central banks surveyed by BIS are currently engaged in CBDC work. This includes work in emerging economies, where digital versions of fiat currencies could serve as vital tools for financially marginalized populations.
However, this encouraging progress does not indicate the dominance of cryptocurrencies. CBDCs, if issued, are seen as a complement to domestic payment methods rather than a replacement. The reported uses for stablecoins and other crypto assets remain primarily within the crypto ecosystem, with cross-border remittances and consumer purchases being the most popular applications.
Interestingly, the survey reveals changing attitudes towards private crypto markets, which spurred many central banks to consider their options. However, enthusiasm might have waned post the 2022 crypto market crash, leading to an increased number of central banks who believe they’re unlikely to issue a CBDC soon.
Evidently, attitudes toward digital currencies are diverse. The Bank of England recognises a likely need for a digital pound, while the European Commission has proposed a bill to support a digital euro. Conversely, the U.S. Treasury focuses on maintaining privacy in digital transactions.
In practice, CBDCs are not mere concepts. Real-life implementation is underway in the Bahamas, Eastern Caribbean, Jamaica, and Nigeria with retail CBDCs already in circulation. However, while the adoption of digital currencies may unlock new economic potentials, the pilot of a digital yuan in China has sparked concerns over state surveillance, underscoring the challenge of balancing advancement and privacy.
As we navigate the complexities of the digital currency landscape, we need to stay cautious, and forward-looking. The development and potential of CBDCs come with both promises and perils, underscoring the need for balanced and informed discussions as we step towards this new era of digital finance.
Source: Coindesk
