Central Banks Embrace CBDCs and Crypto: What You Need to Know

The State of Central Bank Digital Currencies (CBDCs) and Crypto

The Bank for International Settlements (BIS) recently conducted a survey on central bank digital currencies (CBDCs) and crypto, and the results are in. Here’s the breakdown:

93% of the 86 central banks surveyed are actively involved in CBDC work.
More than half of these banks are running experiments or working on pilots.
While some central banks are less likely to issue a retail CBDC in the next three years, others are more inclined to do so.
Wholesale CBDCs, which would be used for interbank transactions, are gaining acceptance.
The motivation behind CBDC research varies, with cross-border payment enhancement and financial inclusion being key drivers.

The Rise of Stablecoins and Crypto

The emergence of stablecoins and cryptocurrencies has driven central banks to expedite their CBDC work. Here are the key findings:

60% of central banks have accelerated their CBDC work due to the existence of stablecoins and crypto assets.
70% of central banks are researching the potential instability caused by stablecoins in their economies.
40% of central banks are studying the usage of crypto assets and stablecoins within their jurisdictions.
However, stablecoins and crypto assets are primarily used within decentralized finance platforms and crypto exchanges, with minimal usage for remittances and retail payments.

Hot Take: CBDCs and Crypto on the Rise, but Challenges Remain

The BIS survey indicates that central banks are actively engaged in CBDC research and experimentation. The acceptance of wholesale CBDCs and the motivation to enhance cross-border payments are positive developments. However, the potential instability caused by stablecoins and the limited usage of crypto assets for everyday transactions are challenges that need to be addressed. As the world of finance continues to innovate, finding the right balance between traditional currencies, CBDCs, and cryptocurrencies will be crucial for a sustainable and inclusive financial ecosystem.