By the end of this decade more than twenty central banks in developed and emerging economies are anticipated to introduce their own digital currencies according to a research released by the Bank for International Settlements (BIS). The vast majority of stablecoins produced by the government will be used in retail environments according to BIS experts . At the end of 2022 a study of 86 central banks found that 11 regulators were willing to imitate the central banks of the Bahamas, Jamaica and Nigeria who had previously adopted retail CBDCs. The public’s declining interest in physical money and the necessity to give them an alternative to private cryptocurrencies are what are driving this trend .
Retail and Wholesale CBDCs
According to the report nine central banks are considering whether to issue digital currencies in bulk for interbank trade. Asset tokenization can open up new functions and improve access to financial markets . One of the primary areas of interest for central banks when creating wholesale CBDCs is optimizing cross-border payments.
Growing Interest in CBDCs
According to 93% of those surveyed BIS has noticed a considerable increase in central banks looking at CBDC potential or actively contributing to their development. 60% of the central banks questioned agreed that stablecoins can hasten settlement and payment processes. Nearly 40% of respondents claimed to have investigated the possibility of stablecoins for individual or business settlements either personally or through financial institutions they control . The widespread use of crypto assets such as stablecoins for payments might endanger the stability of the financial system as BIS researchers warn.
Challenges to International Adoption
The head of the BIS Innovation Center Cecilia Skingsley recently voiced worry that a contentious foreign policy climate may make it difficult to use state-backed cryptocurrencies internationally . CBDCs have many advantages but to successfully apply them globally geopolitical obstacles must be overcome .