With the observed decrease in use of cash, there is an increasing need in understanding the intentions and plans of Central Banks all around the world in issuing Central Bank Digital Currencies (CBDCs). Therefore, Bank for International Settlements (BIS) issued a report after conducting 2018 and 2019 surveys on CBDCs, where the participants are Central Banks. This report is titled "Impending arrival – a sequel to the survey on central bank digital currency" and published in January 2020. It is available at the official website of BIS and from the references listed below.

In this blog, I will explain summary of the results.

Brief Background Information about CBDCs

• A CBDC is a Central Bank-issued digital money.

• Depending on its level of accessibility, it could be a 'general purpose' or 'wholesale' CBDC.

• Wholesale token-based CBDC: Restricted access digital token for wholesale settlements (such as interbank payments and securities settlement).

• General purpose CBDC: Available to the general public based on tokens or accounts.

Respondents of the Survey

• Number of respondents from 2018 survey to 2019 survey improved a little bit from 63 to 66 respondents (Central Banks).

• Respondents represent a wide range of geographical base.

• 21 of the Central Banks are emerging market economies (EMEs) and 45 of them are advanced economies (AEs).

• Respondent Central Banks' economies represent 75% of the World population and 90% of global economic output.

Brief Summary of the Survey Results

Do Central Banks conduct work on CBDC?

• Central Banks representing 20% of the World population indicate that they are likely to issue first CBDCs in the next few years.

• Emerging market economies are ahead of advanced economies to undertake the intensive work on issuing CBDCs.

• Central Banks stating that they are (or soon will be) engaged in CBDC work increased from 70% in 2018 to 80% of respondents in 2019.

• Only 15% of Central Banks that are conducting CBDC work is interested in wholesale CBDC but 50% in both wholesale and general purpose.

• 40% of Central Banks that are conducting CBDC work is doing experiments whereas 10% of them are developing pilot projects.

• All Central Banks that are in the phase of developing pilot projects are in EMEs.

What are the motivations of Central Banks in conducting work on CBDC issuance?

General Purpose CBDC:

• For emerging market economies, motivations are to set domestic payment efficiency, payments safety and financial inclusion.

• For advanced economies, it is mostly about payments safety.

• Slightly over 50% of the respondent Central Banks state that Central Bank issued cash for payments is declining.

• Almost 50% of them conducted a recent study of public use of cash.

• Around 35% of them anticipated decline in public's ability to access Central Bank issued cash in the medium term (up to 6 years).

• Around 15% of them indicated that Central bank issued cash in circulation is declining.

Wholesale CBDC:

• For emerging market economies, motivations are to improve domestic payment efficiency, payments safety and financial stability.

• For advanced economies, it is mostly about increased efficiency for cross-border payments.

Do Central Banks work on changing the laws to have legal authority to issue CBDC?

• 25% of respondents indicate that they have already changed or currently changing the legal infrastructure.

• Around 35% of them do not have the legal power to issue CBDC.

• Around 40% of them are unsure about their legal authority.

Do Central Banks evaluate issuing CBDC seriously?

• 10% of respondents state that they are likely to issue general purpose CBDC in the short-term (up to 3 years), twice as many as last year.

• They constitute 20% of the world population and they are all emerging market economies.

• 20% of respondents state that they are likely to issue general purpose CBDC in the medium-term (up to 6 years).

• They constitute only 2% of the world population and 90% of them are emerging market economies.

• 70% of respondents state that they are likely to issue any type of CBDC in the future.

• Fewer Central Banks consider issuing wholesale CBDC, in either short or medium-term.

• Emerging market economy Central Banks report that they are more likely to issue a CBDC than that of advanced economy counterparts.

Do Central Banks evaluate the impacts of private (non-Central Bank issued) digital tokens?

Cryptocurrencies:

• None of the Central Banks reported any significant or wider public use of cryptocurrencies for either domestic or cross-border payments.

• The usage of cryptocurrencies is considered either minimal (“trivial/no use”) or concentrated in niche groups.

Stablecoins:

• Around 60% of respondent Central Banks reported that they consider the impact of monetary and financial stability of stablecoins.

References

[1] Boar, C., Holden, H., & Wadsworth, A. (2020). Impending arrival–a sequel to the survey on central bank digital currency. BIS Paper, (107). https://www.bis.org/publ/bppdf/bispap107.pdf

A goodbye message from the author:

Bank for International Settlements (BIS) today (June 30, 2020) announced the expansion of the BIS Innovation Hub with the establishment of new Hub centers in the next two years. These four new centers will be placed in Toronto, London, Frankfurt & Paris and Stockholm. The BIS will also form a strategic partnership with the Federal Reserve System (New York).

A see you next time message from the author:

More subtopics yet to come:

1. What is CBDC?

2. Economic design and impacts on monetary and financial stability

3. Reasons fostering or discouraging the implementation of CBDC

4. Technology design of central bank digital currency