The Rise of CBDCs
A recent survey by the Bank for International Settlements, affectionately known as BIS, unveiled that a staggering 90% of central banks across the globe are diving headfirst into the realm of Central Bank Digital Currencies (CBDCs). With the pandemic pushing more financial transactions online than ever before, it’s no wonder that these financial institutions are exploring these digital alternatives. The number of banks getting serious about CBDCs has jumped from about 83% in 2020 to this impressive figure.
Survey Insights: What Did They Find?
After quizzing 81 central banks between October and December 2021, BIS reported that 26% are already piloting their CBDCs, which is almost double from the previous year. A staggering 60% are conducting experiments or proofs-of-concept, turning the question from ‘Will they?’ to ‘When will they?’
- 90% of central banks are engaged in CBDC work.
- 26% are piloting CBDC projects.
- 60% are testing various concepts.
Why the Sudden Interest?
The influx of interest in CBDCs can be attributed to several factors. First and foremost was the pandemic leading to a flurry of digital transition — because let’s be honest, if you’ve ever tried to buy your daily latte with cash during a pandemic, you know how that went down. Additionally, the rise of stablecoins and competing cryptocurrencies has prompted banks to consider CBDCs as a viable, stable alternative.
International Examples of CBDCs
Looking at the global landscape, the Bahamas made waves by launching the Sand Dollar in October 2020. One year later, Nigeria followed suit with the eNaira. China has also been in the CBDC game, with their digital yuan set to expand its influence. These countries are blazing trails, and it’s only a matter of time before more central banks join the fray.
The Benefits of CBDCs
CBDCs aren’t just about being trendy in the finance world; they hold the potential to revolutionize payment systems. Burkhard Balz from Deutsche Bundesbank emphasized that a well-crafted CBDC could provide a fair and efficient way for everyone, including folks less adept with digital tech, to engage in the digital economy. Imagine being able to pay for your coffee without having to rummage through your pockets for coins!
The Way Forward
As we venture further into 2022, the convergence of finance and technology promises a future where CBDCs play a pivotal role. However, amidst the excitement, there are ongoing concerns regarding cryptocurrencies, where over 60% of surveyed banks viewed them as having little to no use in domestic payments. As the world eagerly waits for this digital currency revolution, central banks remain cautious, ensuring that CBDCs complement, rather than disrupt, the financial ecosystem.
