There could be as many as 15 retail central bank digital currencies and nine wholesale CBDCs in operation by 2030, the Bank for International Settlements says.
And a majority of central banks surveyed by the BIS said there may be value in having a retail CBDC to complement existing fast payment systems, such as Australia’s New Payment Platform.
The BIS has released its 2022 survey of CBDCs, cryptocurrencies and stablecoins, reporting that over the course of last year 93 per cent of the world’s central banks were working on a central bank digital currency in some form or another.
A quarter piloted a retail CBDC and 18 per cent indicated that they are likely to issue a retail CBDC in the near term. More than a quarter of central banks (27 per cent) already have the legal authority to issue CBDCs.
There are four live currently, issued by the central banks of the Bahamas, the Eastern Caribbean, Jamaica and Nigeria.
For the purposes of the report, the BIS defines a CBDC as a digital payment instrument denominated in the national unit of account, which is a direct liability of the central bank. It differs from existing forms of cashless payment instruments, as it represents a direct claim on a central bank rather than a liability of a financial institution.
A “retail” or “general purpose” CBDC is one intended for use by households and firms for everyday transactions.
Wholesale CBDCs are for use in transactions between banks, central banks and other financial institutions. They would serve a similar role as a settlement balance held at a central bank but would allow financial institutions to access new functionality enabled by tokenisation, such as programmability.
The preferred retail CBDC architecture involves distributing CBDCs through intermediaries, which would handle customer sign-up, anti-money laundering checks and the provision of digital wallets and other services.
Work on wholesale CBDCs is largely driven by a desire to enhance cross-border payments.
The report said: “Among the pain points that central banks consider could be alleviated with a wholesale CBDC are the limited operating hours of current payment systems, the length of existing payment chains and the complex processing of compliance checks.”
Having a fast payment system does not preclude the use of a retail CBDC, which bring additional properties to payment systems.
The report said: “Depending on their design, fast payment systems are retail CBDCs can achieve similar objectives, such as enhancing financial inclusion and promoting faster and more efficient domestic and cross-border payments. In addition, they both enable broader innovation and enhanced competition, which can increase the availability and accessibility of cheaper payment products and services.
“More than 80 per cent of central banks said that, in principle, there may be value in having both a fast payment system and a retail CBDC. This is mainly because they believe a CBDC has specific properties and may offer additional features, such as being a riskless form of digital money and allowing access to a wider set of financial institutions and the unbanked population.”
The prospects for cryptocurrencies and stablecoins as part of