BIS Report: Central Banks Across the Globe Adopt Cautious Approach on Their Own Digital Currencies
Switzerland-based Bank of International Settlements (BIS) has recently published a survey/report which shows that central banks are taking a cautious stand on issuing their own digital currencies. The BIS survey spans across 63 of its members notifying their stand on the issuance of central bank digital currencies (CBDCs). The central banks surveyed provide banking facilities to 80% of the world’s population.
The name itself suggests that CBDCs are government-issued digital currencies which are mostly backed by the native currencies of their respective countries. The 24-page report notes that 70% of the surveyed banks are involved in some sort of work concerning CBDCs.
And just below 25% of the banks have the authority to issue their own digital currencies. However, 40 percent of the surveyed banks are uncertain on the actual issuance of CDBC. Many of the banks have moved ahead from the conceptual work to the experimentation stage or trying out the proof-of-concept. However, a large number of banks remain unsure on the issuance of their own coins.
The report states: “Only a limited number of central banks are proceeding to the pilot stage with CBDCs, and even fewer see issuance of a CBDC as likely in the short or medium term. At this stage, most central banks appear to have clarified the challenges of launching a CBDC but they are not yet convinced that the benefits will outweigh the costs.”
Again, among the digital currencies experimented by the central banks, there are two categories - general purpose and wholesale. The wholesale digital currencies are largely limited to specific tasks like interbank payments and used only by banking or financial institutions. The general purpose digital currency, on the other hand, is intended for public use to replace cash in the economy.
The report notes: “Caution and collaboration will reduce the likelihood of unintended consequences. To meet the payment needs of the future, physical cash is unlikely to be the main answer. Most people will have to wait to use a central bank digital currency. However, central banks are working hard to make sure the wait is worth it.”
Demand driven cryptocurrencies like Bitcoin and its peers are seen as a nice pursuit instead of referring them as the future of money. The BIS report notes: “No central banks reported any significant or wider public use of cryptocurrencies for either domestic or cross border payments in their jurisdictions. Usage of cryptocurrencies is assessed to be either minimal (‘trivial/no use’) or concentrated in niche groups.”
It also states that use of cryptocurrencies will remain relatively low due to “low retail acceptance, compliance issues, better public understanding by the general public of the risks involved and, for some jurisdictions, outright bans.”