Introduction
While cash remains dominant (Bech et al., 2018), innovations are pushing central banks to explore Central Bank Digital Currencies (CBDCs) as supplements or replacements for traditional money (CPMI-MC, 2018). A 2019 survey by the Bank for International Settlements (BIS) and the Committee on Payments and Market Infrastructures (CPMI) revealed:
– 70% of central banks are researching CBDCs (up from 63% in 2018).
– 10% of central banks (representing 20% of the global population) may issue retail CBDCs within 3 years.
– Emerging markets show stronger motivation, with 40% advancing to pilot stages.
👉 Discover how CBDCs could reshape global finance
What Are CBDCs?
CBDCs are digital forms of central bank money, distinct from cash or reserves. They are categorized by:
| Type | Use Case | Technology |
|---|---|---|
| Retail CBDC | Public use (e.g., payments) | Token- or account-based |
| Wholesale CBDC | Interbank settlements | Distributed ledger (DLT) |
Key Attributes:
1. Issuer: Central bank.
2. Form: Digital.
3. Accessibility: Broad (retail) or restricted (wholesale).
Global CBDC Progress
1. Research and Development
- 80% of central banks now explore CBDCs (vs. 70% in 2018).
- Emerging markets lead: 40% have moved to pilots (e.g., Bahamas, Eastern Caribbean).
2. Motivations
Retail CBDCs:
- Emerging economies: Financial inclusion, payment efficiency.
- Advanced economies: Payment security (Figure 3).
Wholesale CBDCs:
- Cross-border efficiency (e.g., Canada-Singapore-U.K. experiments).
👉 Learn about CBDC pilots worldwide
Key Findings
1. Legal Frameworks
- 25% of central banks lack clear authority to issue CBDCs (Figure 6).
- Uncertainty persists due to outdated laws.
2. Projected Timelines
- Short-term (3 years): 10% of central banks may launch retail CBDCs.
- Mid-term (6 years): 20% for retail; fewer for wholesale (Figure 7).
3. Private Digital Tokens
- Cryptocurrencies remain niche; stablecoins gain attention (60% of central banks analyzing impacts).
Case Studies
Bahamas: “Sand Dollar” (Retail CBDC)
- Goal: Financial inclusion for 700 islands.
- Design: Account-based, capped holdings, no interest.
Eastern Caribbean: “DCash” (Retail CBDC)
- Goal: Reduce cash dependency.
- Design: Token-based DLT, identity-verified transactions.
FAQs
Q1: How do CBDCs differ from cryptocurrencies?
A: CBDCs are state-backed and centralized, unlike decentralized cryptocurrencies like Bitcoin.
Q2: Will CBDCs replace cash?
A: Likely complementary—cash remains vital in many economies.
Q3: Which countries are closest to launching CBDCs?
A: Bahamas, Eastern Caribbean, Sweden, and China (digital yuan pilot).
Q4: Are CBDCs a threat to banks?
A: Designed with safeguards (e.g., holding limits) to prevent disintermediation.
Q5: How do CBDCs improve cross-border payments?
A: Wholesale CBDCs can streamline interbank settlements via DLT.
Conclusion
CBDCs are transitioning from theory to reality, driven by:
– Emerging markets: Financial inclusion and efficiency.
– Global collaboration: BIS Innovation Hub initiatives.