For the third consecutive year, 65 central banks participated in the BIS survey. The representatives of these financial institutions consider it unlikely to issue CBDCs in the short to medium term.
In recent days, the general manager of the Bank for International Settlements (BIS), Agustín Carstens, spoke about central banks. He said that only they can “stabilize the value of digital currencies and ensure the elasticity of the aggregate supply of said money.” He added that they are also in charge of “guaranteeing the supervision and security of the operation of the system.”
According to the BIS, this role “requires a solid and unequivocal legal framework to issue central bank digital currencies (CBDC).” However, the most recent survey by the agency revealed that 44% of central banks are in a situation of legal uncertainty. This situation limits their ability to issue and manage this type of currency.
The BIS published those results in the report “Ready, Steady, Go?”, in which they explore the development of digital currencies. They report that 26% of central banks do not yet have the legal authority to issue a CBDC. Besides, they explain that about 18% are adapting the current laws and just over 5% are changing their laws to issue these currencies.
Those results agree with a review that the International Monetary Fund recently made. They indicate that about 80% of the world’s central banks do not have laws that allow them to issue CBDCs. In other words, they would not be able to legally issue this type of assets without the approval of new legal regulation.
Interest from Central Banks in CBDC
The BIS report states that all this has occurred in a context in which 86% of the banks surveyed express their interest in the subject. They note that “the numerous in-depth evaluations of designs and policies related to these currencies demonstrate.”
The Bank for International Settlements applied the questionnaire to 65 central banks, representing 72% worldwide, late in 2020.
Sixty percent of the respondents indicate that they have not yet advanced in the development and preparation of a CBDC. The BIS concludes that it is unlikely that most central banks will be able to issue digital currencies in the short to medium term.
About 48% of central banks are still unsure whether they can issue a digital currency, according to the report. They say that many have not even sought clarification on their mandates in this regard.
Only Advanced Economies Will Issue a CBDC
According to the report, only some central banks in advanced economies are more likely to issue a CBDC in the next three years. In that sense, Carstens spoke about the Sand Dollar (of the Central Bank of The Bahamas) and the Digital Yuan (of the People’s Bank of China).
“There is a great need to issue digital currencies in the current financial context,” emphasized the BIS manager. He reiterated that the agency has been in favor of rushing central banks to issue digital money.
The Bank for International Settlements also asked the banks about the reasons why their interest in CBDCs grew. The latter mentioned in the survey that they need to join the acceleration process of digital payments that emerged due to COVID-19. Besides, they indicated that they seek to achieve greater financial inclusion.
By Alexander Salazar
