A new study has found the value of payments via CBDCs (Central Bank Digital Currencies) will reach $213 billion annually by 2030; up from just $100 million in 2023.
CBDC transactions to exceed $213 billion by 2030
This radical growth of over 260,000% reflects the early stage of the sector; currently limited to pilot projects.
Adoption will be driven by governments leveraging CBDCs to boost financial inclusion and increase control over how digital payments are made.
CBDCs, says the report, will improve access to digital payments, particularly in emerging economies; where mobile penetration is significantly higher than banking penetration.
Although the efficacy of CBDCs in economies where they have launched is still extremely low hampered by consumer concerns over privacy.
In Nigeria — one of four jurisdictions to launch a digital currency for the public alongside the Bahamas, the Eastern Caribbean, and Jamaica — less than 0.5% of citizens used the eNaira more than a year on from its October 2021 launch.
The idea is also yet to take off in China, which launched a pilot programme in selected cities in 2020 to challenge the dominance of digital payments apps Alipay and WeChat.
Transactions using private digital systems for Q3 2022 were valued at Rmb87.5 trillion ($12.5trillion) — those using the digital renminbi were just a fraction of that at Rmb100 billion ($14.5 billion).
Domestic payments account for over 90% of CBDCs by 2030
The research found by 2030, 92% of the total value transacted via CBDCs will be paid domestically. This reflects a change from almost 100% during current pilot stages, as of 2023.
Since CBDCs are issued by central banks, they will be closely targeted to domestic payment challenges initially, with cross-border payments coming later, as systems become established and links made between CBDCs used by individual countries.
“While cross-border payments currently have high costs and slow transaction speeds, this area is not the focus of CBDC development,” says report author Nick Maynard.
“As CBDC adoption will be very country specific, it will be incumbent on cross-border payment networks to link schemes together; allowing the wider payments industry to benefit from CBDCs.”
High demand key for CBDC platforms providers
The research identified lack of commercial product development around CBDCs as a key limiting factor for the current market, with few well-defined platforms for central banks to leverage.
Cheaper and faster payments, more financial inclusion and the crowding out of cryptocurrencies and Big Tech are the aims.
Yet governments’ enthusiasm is not matched by the citizens they represent, many of whom view central bank digital currencies as an encroachment into their private lives and are unsure what benefits the projects are supposed to deliver.
Whilst this is still a very real threat to deployment movement towards the end goal will continue to be slow.
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