BIS Survey 2020 reveals 80% Central Banks developing new Digital Currencies to counter Cryptocurrencies
A new survey by BIS reveals that 80 % of central banks across the globe are in the process to launch their own digital currency, which is a significant development in recent years.
The survey has been conducted by the Bank of International Settlements. (BIS).It is dubbed as “Impending Arrival – an Arrival Sequel to the Survey on Central bank Digital Currency.”
The Survey briefly evaluated last year’s developments and concluded that most of the central banks are exploring the latest innovative blockchain technology for the improvement of their monetary structure.
66 banks have been included in the survey, out of which 21 central banks represent developed and advanced economies and 45 central banks represent the developing economies. It is noteworthy that these 66 Central banks cover 90 percent of the world’s overall economic output and 75 % of the world’s total population.
The bank of International Settlements (BIS) off-late has changed its stance on the central bank digital currencies i.e. the CBDC. These CBDC are the new forms of digital currencies approved by the governments of the respective countries.
These currencies are designed with core user-friendly features and thus can be transferred instantly 24/7. They can be transferred seamlessly at the domestic level as well as at the international level. They utilize the digital ledger technology for this digital representation of the fiat currencies
Cryptocurrencies have not been welcomed open-heartedly by most of the central banks, and other traditional financial entities. But these bodies are convinced about the backend fundamental technology i.e. Blockchain technology and also the benefits of cryptocurrencies. Most of the banks thus working on developing some or other form of Central Bank Digital Currencies (CBDCs).
According to the BIS reports:
“Central Banks are underlying 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.”
More revelations in the Survey
Most of the Central banks are in the final phase to evaluate the aftermaths of the CBDC about how they can be replaced for fiat money or can be deployed as a secondary option. A two-fold rise in a number of banks has been witnessed which indicated that shortly they will launch general purpose CBDC. 20% are expected to issue CBDC in medium-term whereas the overall collective issuance of CBDC which will represent 20 percent of the world’s population will take place in the next three years.
40 % of the banks are in the second phase of testing real-time feasibility of the projects whereas 10% are in the pilot phase.
Are CBDCs different from Cryptocurrencies?
CBDCs are the traditional fiat money transformed in digital form and issued and approved by the native central bank of the respective country. Whereas most of the cryptocurrencies are being governed by private bodies or by online crypto communities rather than a centralized authority.
As the banks want to deploy the core blockchain technology behind the crypto assets, they too are expending this fundamental technology as a base for the development of CBDC.
Reasons behind the Proactive Monetary policies of Central Banks
Most of the Central banks were compelled to take this decision owing to the action taken by the People’s Bank of China to launch their own CBDC dubbed as the Chinese Yuan. China in fact propelled this decision to protect the monetary sovereignty amidst the growing panic for Facebook’s proposed Libra currency.
The decision was followed by the Japanese government and many other global financial institutions. Many major financial institutions formed their groups to brood over the development of the CBDCs. The Bank of Canada, The European Central Bank, The Bank of England, the Swiss National Bank, the Bank of International Settlements, The Bank of Japan and the Sveriges Riksbank.
Other reasons which were disclosed by the authorities for the pursuance of the CBDC were mentioned as Payment safety, financial stability, and domestic payment efficiency.
One more reason which was revealed by the banks from emerging market economies was the financial inclusion as they still lack extensive infrastructure for the inclusion of a large population to avail financial services.
It is intriguing to watch how these banks are now bracing-up to combat the invasion of cryptocurrencies which they contempt before a while.
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CBW - External Analyst