Looking beyond Bitcoin: 80% of central banks consider launching CBDCs

Lavina Daryanani
Source: TotalKrypto

As institutional and retail players across the globe remain inclined towards Bitcoin and other cryptos, regulators from most nations are more interested in CBDCs—digital tokens pegged to the value of fiat currencies. With the future of money, all set to be digital, opting for lesser decentralized tokens is perhaps be better than utterly refraining to embrace blockchain technology.

So, are central banks too “in for the tech?”

Per Big 4 accounting firm PwC, approximately 3 out of 4 central banks across the world are interested in launching their native digital currencies. Highlighting the same, PwC’s report outlined,

It is estimated that more than 80% of central banks are considering launching a central bank digital currency (CBDC) or have already done so.

On the whole, retail CBDC projects—digital currencies designed for public use—have reached “greater maturity levels” than wholesale projects—digital currencies used by financial institutions that have accounts with central banks. However, the past year has seen progress on many successful wholesale pilots as well.

According to PwC, retail projects are led by the Central Bank of Nigeria’s (CBN) eNaira, the first CBDC in Africa, and the Sand Dollar, issued by the Central Bank of the Bahamas as legal tender in October 2020, making the Bahamas the first country to launch a CBDC.

Commenting on similar lines, Haydn Jones, Blockchain & Crypto Specialist at PwC UK, said,

We expect CBDC research, testing and implementation will intensify in 2022. The success of Nigeria’s eNaira is likely to spur CBDC development in countries where financial inclusion is one of the key desired outcomes.”

China, on the other hand, became the first major economy to pilot a CBDC in 2020 with the digital yuan, and as of March 2022 pilot programs are running in 12 cities, including Beijing and Shanghai.

On the wholesale side, the Bridge project—the combined effort of the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BoT)—carries the torch. As such, it is focused on developing a proof-of-concept prototype to enable real-time, cross-border foreign exchange payments using distributed ledger technology.

Alongside, PwC’s index also ranks the Monetary Authority of Singapore (MAS) highly, as it continues the development of a wholesale CBDC for cross-currency payments.

John Garvey, the Global Financial Services Leader at PwC United States went on to highlight how it’s important for financial institutions to understand where central banks are with digital currencies. At the end of the day, CBDCs will start flowing through the payment system and start to hit bank balance sheets. Thus, consultation and clarification would only HODL the key to inclusivity. The exec concluded by asserting,

“One thing that is clear, lowering the cost of payments in an economy provides value throughout the economy and for citizens. If CBDCs can ultimately enable more efficient payments, that will benefit everyone.”

The report also provided an overview of the top ten USD-pegged stablecoins by market cap and analyzed how they function and what they’re backed by. It specifically noted that stablecoins have become an “integral part of the crypto ecosystem” and it is “impossible” for any fund or institution “to be active in crypto without using stablecoins.”

In fact, as highlighted in an article yesterday, stablecoins have indeed notched up their game, with the likes of UST and DAI climbing higher on the crypto rankings list.

The bottom line

We’re more than 13 years down the line since Bitcoin was launched, but still haven’t been able to successfully attach the “mainstream” tag to it. Bitcoin still remains to be the not-so-novel digital monetary variant that the conventional financial system is still merely trying to get used to.

Going forward, we will definitely have a world, a world with more than just Bitcoin and other volatile cryptos whose feet belong to the same boat. But in that world, for CBDCs to take up the reins, it will have to widely be adopted by the masses.