Notes – Impending arrival: A Sequel to the Survey on Central Bank Digital Currencies

p. 1 – Our survey shows that central banks are undertaking extensive work on central bank digital currencies. Globally, emerging market economies are moving from conceptual research to intensive practical development, driven by stronger motivations than those of advanced economy central banks. Central banks representing a fifth of the world’s population say they are likely to issue the first CBDCs in the next few years.

At the same time, so-called cryptocurrencies remain a niche means of payment.

p.3 – The survey corroborates the findings from last year’s exercise, especially that a wide variety of motivations drives extensive central bank research and experimentation on CBDCs. Only a few EME central banks have progressed to intensive development (eg developing the operational arrangements for a CBDC and/or amending laws to allow the central bank to issue one) or pilot projects and have firm intentions to issue a CBDC soon. Nonetheless, their plans appear to be accelerating compared with earlier expectations.

p.4 – EMEs have generally stronger motivations than advanced economies to work on CBDCs (which can act as a substitute or complement to bank notes). Domestic payments efficiency, payments safety and financial inclusion were, on average, all considered “very important” in this respect for EMEs.

Other central banks have the opposite challenge: a low or declining use of cash for payments motivates research into a CBDC that would maintain public access to central bank money. New survey questions on cash use shed further light on this trend. Our survey shows that just under half of the world’s central banks are investigating the public’s use of cash and a third are concerned that access to cash could decline in the medium term (Graph 4, left-hand panel). This corroborates other studies that show cash in circulation is increasing (eg Bech et al (2017)) but that much of this is in high-denomination notes used as a store of value rather than as a means of payment (Bech and Boar (2019))

p. 6 – A central bank issuing a CBDC needs the legal authority to do so which, as in the previous survey, about a quarter of central banks have, or will soon have, such authority. A third do not have authority and about 40% remain unsure (Graph 6). The continued high level of uncertainty is not surprising, given that most central bank mandates predate many forms of electronic money. Additionally, in the absence of any plans to issue a CBDC, central banks may not be able to prioritise a clarification of their mandates.

p. 8 – Consistent with their stronger motivations, EME central banks consider themselves more likely to issue a CBDC than do their advanced economy peers. For general purpose CBDCs, every central bank reportedly very likely or likely to issue in the short term is an EME institution

For cryptocurrencies, the results are almost exactly the same as in the 2018 survey: no central banks reported any significant or wider public use of cryptocurrencies for either domestic or cross-border payments; and the usage of cryptocurrencies is considered either minimal (“trivial/no use”) or concentrated in niche groups. The one difference to highlight is that, in 2019, one central bank that did not contribute in 2018 and whose jurisdiction is facing serious civil unrest, considered cryptocurrency use significant domestically and saw wider public use for cross-border payments.

Beyond cryptocurrencies, the survey found that only about 60% of central banks are considering the impact of monetary and financial stability of “stablecoins” (Graph 8, left-hand panel). The survey defined these tokens as those with an identifiable issuer or that represent a claim and/or underlying asset (unlike a cryptocurrency). These tokens pose a number of risks, especially when available globally (G7 (2019)). Central banks not considering their impact almost entirely represent EME jurisdictions (Graph 8, centre panel). For the majority of those jurisdictions, remittances represent a significant proportion of GDP. Yet despite this, the majority are also engaged in work on CBDCs, some of which is very advanced (Graph 8, right-hand panel). Globally, only a handful of central banks responded that concern about cryptocurrencies or other private digital tokens was motivating work on CBDCs.

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