CBDC Weekly: Digital Currency Under Consideration by 80% of Central Banks; BIS Studies Suggest Involving Nonbanks, Not Blockchain


While followers of central bank digital currencies (CBDCs) have generally been tracking 85 to 91 projects, a new study by top consulting and accounting firm PwC found that 80% of central banks around the world are at least considering adding a digital version of their national fiat currencies.

Those numbers reflect both retail and wholesale CBDCs, the study added, led by Nigeria and Thailand, respectively.

That comes as a “rise in private sector cryptoassets” shows that with some $190 billion in circulation and “stablecoins are emerging as a complement to existing payment ecosystems,” said Haydn Jones, director and senior blockchain market specialist at PwC U.K., in its Global CBDC Index and Stablecoin Overview 2022. Like CBDCs, they can be monitored and controlled to the extent desired by individual countries.

In the U.S., Acting Comptroller of the Currency Michael Hsu called for private stablecoins to be interoperable with each other and CBDCs, noting that it would “facilitate broader use of the dollar instead of a particular corporate-backed stablecoin as the base currency for trade and finance in a blockchain-based digital future.”

Read more: OCC’s Comptroller Wants Stablecoins to Be Interoperable With US CBDC

The Depository Trust and Clearing Corporation (DTCC) announced the launch of a new CBDC project seeking to learn more about how a U.S. digital dollar design “might operate in the U.S. clearing and settlement infrastructure using distributed ledger technology (DLT).”

See more: DTCC Launches Digital Currency Project

Meanwhile, the Bank for International Settlements (BIS) issued a massive collection of reports covering the CBDC plans of 26 emerging economies as diverse as Argentina and the Philippines, as well as Israel, Indonesia and India.

Like advanced market economies, the core motivation for emerging market economies’ moves toward CBDCs is “achieving greater payment system efficiency,” the report found. “… Other significant considerations include strengthening competition among payments service providers (PSPs), increasing efficiency and reducing the costs of financial services.”

The top motivations in these countries were providing a digital form of cash and better financial inclusion. Top concerns were cyber risks (including hacks, network resilience, cost and scalability) bank disintermediation and the potential for low adoption.

More than half the banks covered in the report worried that if “not carefully managed, [cross-border CBDCs] could spur currency substitution, exchange rate volatility and tax avoidance.”

Another BIS report on CBDCs’ role in financial inclusion found that they could be designed in a way that involves payment service providers (PSPs), banks and nonbanks.

“By enabling a new class of PSPs to enter the market, CBDCs could introduce more vibrancy and innovation, leading to more tailored and compelling value propositions for both payers and payees,” the report said.

Read more: Nonbank Players Find Themselves at Center of Expanding CBDC Debate

It also found that the blockchain technology underlying cryptocurrencies and stablecoins is not necessarily the best choice for CBDC design.

See more: Do CBDCs Need Blockchain? Growing Number of Central Banks Say No

Namibia’s central bank announced plans to launch a digital version of its own currency, the Namibian dollar. Bank of Namibia Governor Johannes Gawaxab suggested worries about the impact of stablecoins were behind this, Namibia Daily News reported, adding there is “a need for central banks to have a clear digital currency agenda to reinforce Central Bank authority over money and maintain control over the payment system.”

In Japan, Uchida Shinichi, an executive director of the Bank of Japan, said the decision to issue a CBDC is up to the electorate, not the central bank, which suggested that a referendum may be forthcoming, Ledger Insights reported. A key motivation, he added, is to head off yen-denominated stablecoins.

The Bank of Israel said it did not believe a digital shekel would have much impact on the country’s banking system.

Read more: Digital Shekel Won’t Disrupt Israel, Central Bank Says