Key Points
- The US House of Representatives has passed a bill to ban the Federal Reserve from issuing a Central Bank Digital Currency (CBDC), but interest in CBDCs continues to grow globally.
- 94% of central banks are now exploring CBDCs, with the majority likely to implement wholesale CBDCs rather than retail CBDCs in the next six years.
Despite the recent move by the U.S. House of Representatives to ban the Federal Reserve from issuing a Central Bank Digital Currency (CBDC), the global interest in CBDCs continues to grow.
Findings of the survey
A recent survey by the Bank for International Settlements (BIS) revealed that 94% of central banks are exploring CBDCs, a rise from 90% in 2021.
The survey included 86 banks and found that these banks are more likely to implement wholesale CBDCs rather than retail CBDCs in the next six years.
Wholesale CBDCs facilitate transactions between banks and financial institutions, while retail CBDCs are for public use.
BIS researchers stated that central banks are proceeding at their own pace, taking diverse approaches and considering different design features.
For retail CBDCs, more than half of central banks are considering holding limits, interoperability, offline options, and zero remuneration.
Global interest in digital currencies
Countries around the world have been considering digital currencies for years, with China being an early pioneer. Nigeria and the Bahamas were among the first to issue their own CBDCs.
Former U.S. President Donald Trump has firmly opposed the idea, vowing to prevent the creation of a U.S CBDC, citing it as a “dangerous threat to freedom.”
Despite the rapid exploration of CBDCs by central banks in advanced economies, the adoption of stablecoins remains relatively modest.
As of May 2024, the total market capitalization of cryptocurrencies stood at $2.7 trillion. Stablecoins constituted only a small fraction, accounting for just 6% of the cumulative crypto market cap, which amounts to approximately $161 billion.
The report concluded that stablecoins are rarely used for payments outside the crypto ecosystem. About two out of three responding jurisdictions have or are working on a framework to regulate stablecoins and other cryptoassets.
As things unfold, it would be interesting to see how discussions on digital currencies shape global economic policies and financial innovations.
