More and more central banks are considering issuing their own digital currencies, but critics warn

According to a recent survey by the Bank for International Settlements (BIS), an increasing number of central banks are contemplating issuing their own digital currencies.

The survey covered 86 central banks representing 82% of the world’s population and 94% of its economic output.

In 2022, 93% of these banks worked on some form of central bank digital currency (CBDC), with over half carrying out concrete experiments or developing pilot projects.

The research indicates that retail-focused CBDCs are more advanced than those intended for wholesale payments.

The survey forecasts that by 2030, there could be 15 retail and 9 wholesale CBDCs in circulation.

Four central banks – the Bahamas, Eastern Caribbean, Jamaica, and Nigeria – have already issued their own digital currencies.

The emergence of cryptoassets and stable digital currencies has quickened central banks’ considerations of issuing their own digital currencies, with 60% of surveyed banks confirming this trend.

CBDC development is more advanced in emerging economies, driven primarily by goals of financial inclusion and effective monetary policy implementation.

Both advanced and emerging economies see wholesale digital currencies as a means to facilitate cross-border payments.

87% of surveyed central banks are considering using private intermediaries for digital currency distribution.

Institutions like the Bank of England and the Reserve Bank of India suggest potential collaboration with the private sector for currency distribution.

CBDCs ARE DIFFERENT FROM CRYPTOS

Central Bank Digital Currencies (CBDCs) are digital tokens issued by a central bank, tied to the value of the respective country’s fiat currency.

They share some similarities with cryptocurrencies like Bitcoin, such as their digital nature, but there are also crucial differences.

Unlike cryptocurrencies, which are decentralized and created without a central authority, CBDCs are issued directly by a central bank.

This centralization differentiates them fundamentally from cryptocurrencies.

While some view cryptocurrencies as offering more freedom due to their decentralized nature, others see potential risks associated with CBDCs, citing concerns about possible misuse of excessive control.

That’s why, for example, Florida and Indiana pass laws banning the use of CBDCs as money in the state.

Moreover, it’s noteworthy that Brazil has initiated a pilot test of the Digital Real this year, marking it as the first South American country to pilot a sovereign digital currency.