A recent report published by the Bank of International Settlements (BIS) has shown that more than 70 per cent of central banks in the world are conducting research towards the issuance of central bank digital currency (CBDC).
The study which has been reiterated by the report to be more analytical than generalized, discussed the progression of digital payments across the year, and why a lot of central banks in the world are finally considering issuance of a national digital currency. It is important to note that CBDCs—central bank digital currencies—are not directly analogous to cryptocurrencies, as even most of the ones that happen to be in test phase are not built on a blockchain or distributed ledger.
The report explicitly isolated Sweden and Uruguay as case studies, given their deeper and open advancements in the implementation of CBDCs in their respective countries. Findings showed that the use of cash, for example, in Sweden has consistently declined in the country, and the abandonment of hard cash might be realistically possible in Sweden even in a few years.
Swish, a mobile payment service in the country has gradually replaced traditional methods, and has steadily gained usage over the past four years. A survey conducted by Sveriges Riksbank showed that over the past eight years, the number of Sweden citizens who reported never to have the need to withdraw hard cash from an ATM has rapidly increased.
In light of this, Sweden’s central bank has chosen to issue an electronic Krona (e-krona) in the near future, and have been actively working on their “e-krona project” since 2017. Last year October, a report on the project was publicly published. While The Riksbank thinks blockchain technology is a little immature at this stage to implement with the e-krona, it envisages a “platform” where payment service providers (PSPs) of the e-Krona would connect and distribute the currency. Those PSPs could, however, employ DLT in providing their services. Uruguay’s e-peso pilot programme is likewise on a similar terrain, with cash circulation declining in the country.
Most Banks Involved with Little Implementation
The BIS which describes itself as ‘a bank for central banks’ is made up of 60 of the world’s central bank. And in its research which studied 63 banks worldwide, with 41 of those CBs based in emerging economies, 70% of them are reported to be in the form of research towards issuance of CBDCs.
While the number is a slight increase over the figures of 2017, only a few showed interest in issuing a CBDC soon, either in the medium term or short term.