Results of the 2021 BIS survey on central bank digital currencies

Nine out of 10 central banks are exploring central bank digital currencies (CBDCs), and more than half are now developing them or running concrete experiments.

In particular, work on retail CBDCs has moved to more advanced stages.

Both Covid-19 and the emergence of stablecoins and other cryptocurrencies have accelerated the work on CBDCs – especially in advanced economies, where central banks say that financial stability has increased in importance as a motivation for their CBDC involvement.

Globally, more than two thirds of central banks consider that they are likely to or might possibly issue a retail CBDC in either the short or medium term.

Work on wholesale CBDCs is increasingly driven by reasons related to cross-border payments efficiency.

Central banks consider CBDCs as capable of alleviating key pain points such as the limited operating hours of current payment systems and the length of current transaction chains.

This survey and its resultant report presents the results of a survey of 81 central banks about their engagement in central bank digital currency (CBDC) work, as well as their motivations and their intentions regarding CBDC issuance.

Over the course of 2021, work on CBDCs gained further momentum. After The Bahamas launched a live retail CBDC (the Sand Dollar) in 2020, Nigeria followed in 2021 with the issuance of eNaira, and the Eastern Caribbean and China released pilot versions of their respective DCash and e-CNY.

And there is likely more to come: a record share of central banks in the survey – 90% – is engaged in some form of CBDC work.

At the same time, the year 2021 was characterised by the strong growth of the cryptoassets and stablecoin market (FSB (2022)).

On average, almost six out of 10 respondent central banks said that this growth has accelerated their work on CBDCs.

This has also spurred collaboration between central banks to monitor the implications of cryptoassets and stablecoins and to coordinate regulatory approaches to contain their risks to the financial system.

Most central banks are considering a retail central bank digital currencies architecture that involves the private sector.

There are generally two ways in which central banks can distribute a CBDC to the public – either directly (a one-tiered model) or indirectly, via private sector intermediaries (a two-tiered model).

In the one-tiered model, the central bank would not only operate the interbank CBDC system but also provide the CBDC account and wallet services directly to the public.

In the two-tiered model, the central bank and trusted private sector intermediaries would work together.

A newly added survey question showed that more than 70% of central banks engaged in some form of CBDC work are considering a two-tiered model.

Activities where many central banks see a potential role for the private sector include, in particular, the onboarding of clients (including the performance of know-your-customer (KYC) processes and anti-money laundering/combating the financing of terrorism (AML/CFT) procedures), as well as the handling of retail payments.

The recording of retail transactions could also be left to the private sector according to many central banks, although a third would rather keep this inhouse.

Another new survey question showed that most central banks (76%) working on a retail CBDC are exploring interoperability with existing payment system(s).

Interoperability can encourage the adoption of CBDCs and enable the coexistence of central bank and commercial bank money (e.g. Group of central banks (2020)).

Payment system interoperability enables banks and other payment service providers (PSPs) to make payments across systems without participating in multiple systems.

This would allow end users to seamlessly move their money in and out of their CBDC accounts, for example from and to their commercial bank accounts using a credit card or electronic money transfer.

To read the full results CLICK HERE

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