Central banks around the world may not be fans of Bitcoin in particular, but the same doesn’t apply for the whole concept of cryptocurrencies. In fact, a recent study indicates that policymakers of leading global banks around the world are seriously considering central bank digital currency (CBDC) as a viable option in the near future.
The study dubbed “Retail CBDCs: The next payments frontier” was released by the tech giant, which is unsurprising considering the company’s consistent involvement in the blockchain and crypto space, and the Official Monetary and Financial Institutions Forum (OMFIF), a central bank think tank.
According to their joint report, central banks around the globe are now admitting that CBDCs would actually be a good substitute for cash in certain circumstances, however, they should be available under all circumstances. The study included an in-depth survey of officials from a total of 23 central banks, 13 of which were from advanced economies while the remaining 10 from emerging economies. The study read:
Central banks are responding to the reality that digital currencies, either privately or publicly issued, will soon be part of the global monetary system, and that it is in their interest to ensure they are neither left behind nor displaced.
While maintaining that a good number of central banks are open and prepared for CBDCs, the report also sheds light on the reasons behind the pro-crypto statistics; according to which it has a lot of to do with preserving monetary sovereignty. Central banks’ worries are legitimate as private-sector digital currencies have the potential to undermine central banks’ monetary sovereignty and threaten financial stability; case in point, Facebook’s project Libra that is on trial for the very same issue.
For central banks, CBDCs could be an essential took for survival hence policymakers and regulators are acknowledging that an effort to understand the technicalities of the new technology is of the utmost importance; so is the incorporation of the technology where appropriate. Despite the “survival of the fittest” scenario, 82% of the survey respondents voiced their concerns regarding CBDCs, voicing that they could be a source of concern for financial stability.
In addition to that, the report revealed that the first-ever CBDC is expected to be implemented within the next five years, however, it might require a public-private partnership to fill the financial services gap owing to the limitations of the central banks. The study concluded:
We are likely to witness the introduction of a central bank — that is fiat — retail digital currency within the next five years, either as a complement to or as a substitute for notes and coins.