BIS Survey Finds More Central Bank Engagement on CBDCs

The Bank for International Settlements (BIS) says an increasing number of central banks are in engaged in some form of central bank digital currency (CBDC) work, thanks largely to their uncertainty about short-term CBDC issuance fading.

The BIS polled 86 central banks in its 2022 survey on CBDC and cryptocurrencies more generally, up from 65 in the 2021 edition and found that 93% were engaged, with retail CBDCs being more advanced than wholesale. It finds that more than 80% of central banks see potential value in having both a retail CBDC and a fast payment system, mostly because a retail CBDC has specific properties and may offer additional features.

It adds that the survey also suggests that there could be 15 retail and nine wholesale CBDCs publicly circulating in 2030. More than nine out of 10 central banks engage with other stakeholders when designing proofs of concept, pilots or live CBDCs. The degree of that engagement and the type of entities involved differ between emerging market and developing economies (EMDEs) and advanced economies (AEs). They also differ by type of CBDC and the stage of work.

The jurisdictions that replied represent, the BIS says, 82% of the world’s population and 94% of global economic output. Of the 86 central banks, 28 were in AEs and 58 in EMDEs.

The survey further shows that, to date, stablecoins and other cryptoassets are rarely used for payments outside the crypto ecosystem, with just 5% and 7% of respondents respectively indicating use by a niche group in their jurisdiction. Some 60% of surveyed central banks reported that they have stepped up their CBDC work in response to the emergence of cryptoassets.

The BIS says that as in previous years, central banks’ engagement in wholesale CBDC work is driven by different motivations from those that apply to their retail CBDC work. Contrary to retail CBDCs, financial inclusion is the least important driver for central banks’ work on wholesale CBDCs. Instead, work on wholesale CBDC is driven mainly by the desire to enhance cross-border payments, both in AEs and in EMDEs. The BIS cites the example of Project Dunbar as a cross-border wholesale CBDC project, the results of which were published in 2022.

Among the key pain points that central banks consider could be alleviated with a wholesale CBDC are the limited operating hours of current payment systems, the length of existing transaction chains, and the complex processing of compliance checks. “Indeed, if CBDC infrastructures were to be made available 24/7, this would address mismatches of operating hours between jurisdictions,” the BIS states. “Also, depending on its design and the access policy of the issuing central bank, a wholesale CBDC is seen as capable of reducing the number of intermediaries, thus shortening transaction chains, and enhancing efficiency of payment processing and compliance protocols.

“Interestingly, the complexity of compliance checks as a friction that could be addressed by a wholesale CBDC is particularly mentioned by EMDEs but less so by AEs,” it adds.