Central Banks Intensify Exploration of Wholesale CBDCs, BIS Survey Reveals

The 2023 survey by the Bank for International Settlements (BIS) indicates a significant uptick in the exploration of Central Bank Digital Currencies (CBDCs) among central banks worldwide, with a notable focus on wholesale CBDCs. The survey, which included responses from 86 central banks, highlighted that 94% of these institutions are investigating the potential of CBDCs, reflecting an increase from 90% in 2021.

According to the survey, central banks are more likely to issue wholesale CBDCs than retail CBDCs within the next six years. Wholesale CBDCs, designed for transactions between financial institutions, are being explored more vigorously, especially in advanced economies (AEs). In 2023, there was a sharp increase in wholesale CBDC experiments, with proofs of concept and pilots growing substantially. For example, in AEs, proofs of concept increased by 35%, and pilots tripled compared to the previous year. Emerging markets and developing economies (EMDEs) also reported increased activity, though at a slower pace.

The primary drivers for both AEs and EMDEs in developing wholesale CBDCs are the efficiencies in cross-border payments. Wholesale CBDCs are expected to enhance interoperability with domestic and international payment systems, enable programmable payments, and facilitate delivery versus payment scenarios.

For retail CBDCs, central banks are considering various design features to address specific economic and social conditions. More than half of the central banks exploring retail CBDCs are contemplating holding limits, interoperability with existing payment systems, offline payment capabilities, and zero remuneration. The motivations for retail CBDCs include enhancing domestic payment efficiencies and ensuring the continued role of central bank money in an increasingly digital financial landscape.

The survey also shed light on the use and regulation of stablecoins. Despite the growing market capitalization of stablecoins, which stood at nearly $162 billion in early 2024, their usage remains primarily confined to the crypto ecosystem. Stablecoins are rarely used for mainstream payments, with their use mainly restricted to niche applications like remittances and cross-border business transactions. Recognizing the potential risks stablecoins pose to payment systems and financial stability, about two-thirds of the surveyed jurisdictions have developed or are working on regulatory frameworks for stablecoins and other cryptoassets.

The discussion around CBDCs has also entered the political arena, particularly in the United States. Former President Donald Trump has positioned himself against CBDCs, emphasizing Bitcoin as a safeguard against perceived central bank overreach. Meanwhile, legislation has been introduced to restrict the Federal Reserve from issuing a CBDC without congressional approval, highlighting the contentious nature of CBDC development in the U.S. political landscape.

The BIS survey underscores the importance of global cooperation in the development and regulation of CBDCs and stablecoins. Given the diverse economic and social conditions across different jurisdictions, a coordinated approach is essential to ensure the safety and efficiency of the global payment ecosystem. This cooperation is crucial as central banks navigate the opportunities and risks presented by the rapid digitalization of money and payments.