According to the results of a poll that was released on Monday by the Bank for International Settlements (BIS), it is anticipated that approximately two dozen central banks located in both developing and developed nations would have digital currencies in circulation by the end of the decade.
As the use of cash continues to fall at an alarming rate, central banks from around the world have begun researching and developing digital versions of their national currencies that may be used in retail settings. They want to prevent the situation where digital payments are left up to the discretion of the private sector. There is also some consideration being given to wholesale versions for use in dealings between various financial organizations.
The majority of new Central Bank Digital Currencies (CBDCs) will emerge in the retail space, where eleven central banks could join their peers in the Bahamas, the Eastern Caribbean, Jamaica, and Nigeria which already run live digital retail currencies, according to the results of a survey of 86 central banks that was conducted by the BIS late in 2022. This survey was conducted in 2022..
According to the BIS, nine central banks may launch CBDCs as part of the wholesale market, which in the near future may make it possible for financial institutions to get access to new functionalities as a result of tokenization.
According to what the authors of the research noted, “Enhancing cross-border payments is among the key drivers of the work that central banks are doing on wholesale CBDCs.”
The European Central Bank is on pace to begin its digital euro pilot in advance of a possible debut in 2028, while the Swiss National Bank said at the end of June that it would issue a wholesale CBDC on Switzerland’s digital exchange as part of a pilot. The number of people participating in the pilot program in China has increased to 260 million, while India and Brazil, two other large economies that are rising, plan to introduce digital currencies in 2019.
The BIS also reported that the proportion of central banks participating in some form of CBDC had increased to 93 percent among those central banks surveyed, with 60 percent of those central banks reporting that the emergence of stablecoins and other cryptoassets had hastened their work.
There has been a lot of upheaval in the cryptocurrency sector over the previous 18 months, including the failure of TerraUSD, an unbacked stablecoin, in May 2022, the collapse of the cryptocurrency exchange FTX in November, and the insolvency of banks such as Silicon Valley Bank and Signature Bank, who served cryptocurrency providers.
Even though these events didn’t have much of an effect on traditional financial markets, they did cause significant sell-offs in a variety of cryptocurrencies.
According to the findings of the survey, almost forty percent of those who participated claimed that their country’s central bank or other institutions in their region had recently conducted a research on the utilization of stablecoins and other cryptoassets among consumers or enterprises.
According to the research published by the BIS, “cryptoassets, including stablecoins, may constitute a threat to financial stability if they become widely used for payment purposes.”