BASEL, Switzerland—The Bank for International Settlements (BIS), the central bankers’ bank, has published a report about Central Bank Digital Currency (CBDC).
The conclusion is central banks should proceed with caution.
The report also shows that while the majority of central banks are researching CBDCs, only a small number plan to issue one in the short to medium term.
The BIS defines a CBDC based on four characteristics. A central bank issues it, and it’s digital, not physical. But it’s also conceivable to have general purpose central bank accounts which aren’t tokenized (account-based). If the digital money is tokenized, then there are two potential types: “wholesale” for financial institutions only, and “general purpose” CDBCs which the BIS refers to as “digital cash,” explained Lender Insights.
Sixty-three banks responded to a BIS survey covering 80% of the world’s population and 90% of economic output.
Nearly Three-Quarters Involved
Seventy percent of banks are engaged in or about to start CBDC work and of these more than half are exploring both general purpose and wholesale CBDCs. Many are using distributed ledger technology (DLT) to replicate wholesale payment systems. When combining the BIS figures, 48% of respondents are exploring wholesale CBDCs and 61% are exploring general purpose CBDCs, stated Lender Insights in its analysis.
Two months ago, the Official Monetary and Financial Institutions Forum published a report stating 38% of the 21 central banks surveyed were exploring wholesale CBDCs, Lender insights noted.
Only five projects have advanced to the pilot phase, but the BIS emphasizes that most proofs of concept and pilots are still investigative and don’t imply concrete plans for implementation.