About two dozen central banks in developing and developed countries are expected to have digital currencies in circulation by the end of the decade, according to a Bank for International Settlements (BIS) survey released on Monday.
Central banks around the world are exploring and working on digital versions of their currencies for retail use so as not to leave digital payments to the private sector in the face of an accelerating cash squeeze. Some are also considering wholesale versions for transactions between financial institutions.
The majority of new central bank digital currencies (CBDCs) will emerge in the retail space, where eleven central banks could join counterparts in the Bahamas, Eastern Caribbean, Jamaica and Nigeria that already use live digital retail currencies, according to a BIS study.
In terms of wholesale trade, which in the future could allow financial institutions to access new features through tokenization, nine central banks could launch CBDCs, according to BIS.
“The expansion of cross-border payments is one of the key factors in the work of central banks on wholesale CBDCs,” the authors of the report write.
The Swiss National Bank said at the end of June that it would issue a wholesale CBDC on the Swiss digital exchange as part of a pilot project, while the European Central Bank is on track to launch its digital euro pilot project and plans to launch in 2028. Pilot testing in China is currently reaching 260 million people, and two other major emerging economies, India and Brazil, plan to launch digital currencies next year.
The BIS also said that the proportion of central banks in its survey participating in some form of CBDC rose to 93%, with 60% saying the emergence of stablecoins and other crypto assets has accelerated their operations.
The crypto market has experienced turmoil over the past 18 months, including the collapse of the unsecured stablecoin TerraUSD in May 2022, the collapse of the FTX cryptocurrency exchange in November, and the failure of banks such as Silicon Valley Bank and Signature Bank, which served crypto providers.
While these events did not have a major impact on traditional financial markets, they did lead to a sell-off in several crypto assets.
The study found that almost 40% of respondents indicated that their central bank or other institutions in their jurisdiction had recently conducted a study on the use of stablecoins and other crypto assets among consumers or businesses.
“If crypto assets, including stablecoins, are widely used for payments, they could pose a threat to financial stability,” the BIS report says.