The growing interest from central banks and the public in so-called CBDCs began in 2019. The projects in China, Sweden, and Canada are the most advanced, according to a report from the BIS.
The Bank for International Settlements (BIS) describes progress towards digital payment systems (with currencies that seem to emulate Bitcoin). The agency notes that these have accelerated substantially so far in 2020 and far exceed the developments of previous years.
The BIS shows these results through the Central Bank Digital Currencies Project Index (CBDCPI), which the agency included in its most recent report in August.
The study seeks to assess the progress and motivations for the issuance of central bank digital currencies (CBDC) in different countries, as well as the interest from central banks and citizens in these currencies. Additionally, the document analyzes technical approaches and parameters behind their design.
The BIS researchers analyzed the motivations and characteristics of the different projects, based on more than 16,000 speeches by central banks in recent years. They also tracked Google Trends and Baidu searches for the term “CBDC,” as well as three related words, between January 2013 and April 2020.
The index shows a remarkable growth in public interest in CBDCs. The progress is evident with the increase in searches for information on CBDC projects on the Internet worldwide. In that sense, these searches considerably exceeded those of Facebook’s Libra project and even those of the main cryptocurrency in the market.
Concerning these data, the BIS report shows a graph in which it presents the statistics of searches in Google Trends. There is an increase in searches on CBDC.
China’s Digital Currency Is the Fastest Growing
Regarding the progress that the different CBDCs have achieved so far worldwide, there is a disparity in different countries of the world.
Although no project is complete yet, many have accelerated their research in recent months. Thus, the projects in China (Digital Currency/Electronic Payment or DC/EP), Sweden (e-Krona), and Canada (e-Dollar and Jasper) are the ones that analysts consider the most advanced.
The Chinese project is the most prominent as it has been the one with the greatest progress this year, implementing pilot tests in 4 regions of the country (which were recently extended to another 3).
With regard to the technology and design of CBDCs, the report shows preferences for blockchain platforms over the conventional technological infrastructure of banks. There is also a predominance of hybrid architectures, in which central banks issue the CBDC while the private sector manages customer service.
The analysts also determined that the interest in these currencies is higher in jurisdictions with greater use of cell phones and greater capacity for innovation.
Among other data collected through the CBDCPI, countries with a great commercial boom are seeking to implement retail CBDC (general retail payments). Wholesale CBDCs – for institutional wholesale payments – are more developed in economies with greater financial development.
Catalysts for Interest in CBDCs
Regarding the motivations for the issuance of CBDC, the BIS index indicates that they vary in each jurisdiction.
However, the main motivation in 2020 has been around overcoming payment problems. There has been a decrease in the use of cash due to the crisis in payment systems that the pandemic has caused. That has aroused the interest in cash-like retail CBDCs, which work like cash.
According to a survey that the BIS Committee on Payments and Market Infrastructures conducted in late 2019, financial inclusion has been one of the main motivations in most countries. Additionally, central banks in advanced economies seek to promote security and solidity alongside domestic payments. In emerging economies, the desire is to achieve greater stability.
By Alexander Salazar
