BIS: Countries with Emerging Economies Are Leading CBDC Development

A survey by the Bank of International Settlements found that EME banks are spearheading national digital currency development.

Researches at the Bank of International Settlements, an international financial institution owned by central banks that is designed to foster international monetary and financial cooperation said in a report on Thursday, January 23rd, that 80 percent of central banks all around the work are “undertaking extensive work on central bank digital currencies.”

The survey, which was conducted to determine global interest in central bank digital currencies (CBDCs), included results from sixty-six central banks collected over the latter half of 2019. The banks were located in both emerging and developed economies.

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Emerging market economies are leading the charge when it comes to

The results of the survey showed that most of the work being done on central bank digital currencies, or CBDCs, is in the experimental and proof-of-concept stages: “the survey corroborates the findings from last year’s exercise, especially that a wide variety of motivations drives extensive central bank research and experimentation on CBDCs,” the report said.

However, “only a few EME (emerging market economy) central banks have progressed to intensive development (e.g. developing the operational arrangements for a CBDC and/or amending laws to allow the central bank to issue one) or pilot projects and have firm intentions to issue a CBDC soon. Nonetheless, their plans appear to be accelerating compared with earlier expectations.”

Specifically, the report said that while 80 percent of the central banks that responded are working on CBDC projects more generally, “some 40% of central banks have progressed from conceptual research to experiments, or proofs-of-concept,” while only “10% have developed pilot projects.”

This 10 percent is entirely comprised of EME (Emerging Market Economy) institutions.

The motivations of these EME institutions, according to the BIS, are “generally stronger motivations than advanced economies,” and included “domestic payments efficiency, payments safety, and financial inclusion.”

In a previous report on CBDCs by the BIS issued in January of last year entitled “Proceeding with caution –a survey on central bank digital currency, “ researchers wrote that “motivations for issuing a CBDC are largely idiosyncratic (e.g., falling availability of cash in a jurisdiction).”

Only 25 percent of respondent banks said they had been granted with the authority to issue a digital currency

The report also took into account whether or not the central banks who responded have the regulatory authority in their home countries to issue digital currencies; according to the results, one-quarter of banks said that they did have such authority, or will have it sometime in the near future.

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“A central bank issuing a CBDC needs the legal authority to do so which, as in the previous survey, about a quarter of central banks have, or will soon have, such authority,” the report said.

“A third do not have authority and about 40% remain unsure… The continued high level of uncertainty is not surprising, given that most central bank mandates predate many forms of electronic money.”

BIS has shown support for CBDCs in the past

Last July, the Financial Times reported that BIS general manager Agustín Carstens said that “many central banks are working on it; we are working on [] supporting them.”

“And it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.”

Still, Carstens explained that “there needs to be evidence for demand… and it is not clear that the demand is there yet. Perhaps people can do what they want by using electronic wallets provided by banks or fintech companies. It depends on the development of payment systems.”

Indeed, the most recent report issued by the BIS also said that “there is no evidence of a widespread or general move to expand this research into experimentation and pilot arrangements. However, a few central banks with sufficient motivation are proceeding to pilot various designs.”

Still, “for most people around the world, a general purpose or wholesale CBDC is still unlikely in their jurisdiction in the medium term.”

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