Nine out of 10 central banks among 81 polled by the Bank for International Settlements are exploring the issuance of central bank digital currencies (CBDCs) amid the emergence of cryptocurrencies as a store of value and runaway inflation.
In a report published Friday that polled central banks in 2021, the BIS pointed out that work on retail CBDCs has moved into more advanced stages, driven by a need to increase financial stability amid the pandemic, and the emergence of stablecoins.
Two-thirds of central banks surveyed are considering issuing retail CBDCs in the foreseeable future, the BIS report said. Efforts on wholesale CBDCs are also being driven by factors related to cross-border payments efficiency, the BIS said.
A number of countries are actively developing their digital currencies.
China, for example, has expanded the pilot range for its digital yuan, the e-CNY, to the provinces of Zhejiang and Fujian last month. Bangko Sentral ng Pilipinas, the central bank of the Philippines, also said last month that it will launch a wholesale CBDC pilot project, coined CBDCPh, to promote the stability of the country’s payment system.
While retail CBDCs are typically designed for the everyday use of the general public, wholesale CBDCs target financial institutions intended for the settlement of large interbank payments or act as central bank reserves.
The BIS survey showed that more central banks are in advanced phases of exploring a CBDC. The share of respondents developing or testing a CBDC almost doubled to 26% in 2021 from 14% in the previous year.
Meanwhile, central banks are putting more effort into retail CBDCs.
Nearly a fifth of central banks are working on a retail CBDC, which is twice the share of those for a wholesale CBDC. When it comes to the underlying architecture, more central banks are looking at those involved in the private sector.
More than 70% of central banks are considering a two-tiered model, where a CBDC is distributed to the public via private sector intermediaries.
To enhance adoption, about 76% of central banks working on a retail CBDC said they are exploring interoperability with existing payment systems.
“Financial stability and enhancing cross-border payments are growing reasons for retail CBDCs,” the BIS said.
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