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Virtually all central banks are considering digital currencies

Virtually all central banks are considering digital currencies

The concept of Central Bank Digital Currencies (CBDCs) is very vague to many people. It is still not always clear what governments and central banks want exactly with this fully digital national currency. Yet almost every central bank appears to be investigating it. It is estimated that 24 will need to be spent by 2030.

93% research digital currency

The Bank of International Settlement (BIS) writes this in a research report. One of the tasks of the BIS is that it conducts research into what is happening in the economy. Between October and December of last year, the institute asked 86 central banks worldwide about what exactly they do in the field of CBDCs and what their motivation is for issuing such a currency. In contrast to most cryptocurrencies, the central bank is behind the wheel with a CBDC.

Currently, there are four central banks that are already issuing a fully digital currency, namely the Bahamas, the Eastern Caribbean island states, Jamaica and Nigeria. In addition, central banks of various countries are already running pilot projects at various stages. For example, Chinese government employees are already being paid in the digital yuan.

There are two types of CBDCs. ‘Retail CBDCs’ are for consumers, and ‘wholesale CBDCs’ will be used by financial institutions to transact with each other. At the moment, the financial system largely works like this, but the transactions are not yet on a blockchain.

According to the BIS, it is expected that by 2030 there will be a total of 24 digital fiat currencies, namely 15 retail CBDCs and 9 wholesale CBDCs. In addition, no less than 93% of all central banks are researching a digital currency.

Central banks have plenty of reasons

There are also signs that many of these institutes are anything but ready; 68% say they won’t be ready to spend one any time soon. Only 18% want to introduce such a currency within the next three years (ie between 2023 and 2026).

Nevertheless, clear reasons are given for the development, such as financial stability and efficiency of payments domestically and between different countries.

There is even discussion within the European Parliament, because it is not clear to everyone exactly what the practical use of a digital euro is. Apparently this is less the case for the central banks studied.

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