Global Banking Institutions Prefer Having a Central Bank Digital Currency

Tech giant IBM recently conducted a survey which shows that global financial institutions prefer central banks to have central-bank-issued-digital-currencies (CBDCs). According to the press release, the joint study was conducted by IBM Blockchain World Wire and the Official Monetary and Financial Institutions Forum (OMFIF).

The study was conducted examining opinions of 21 central banks on the topic of CBDCs and distributed ledger technology. The research notes that out of all these 21 respondents a 38% of banks are already testing a CBDC.

Furthermore, the report talks about the use of CBDC for two things - retail and wholesale purpose. A retail CBDC is the one that is available to everyone while a wholesale CBDC will be used only for interbank transfers.

The report mentions that “No major central bank intends to implement a retail CBDC in the near term. However, the debate about wholesale CBDCs has moved on from questions of feasibility to practical considerations”. It adds, "most survey respondents believe a wholesale CBDC should be issued by the central bank."

One important application of a fiat-pegged CBDC could be that they can help remove credit risk and "ensure stability of the token's value.”

On the other hand, respondents also didn’t show enough confidence on the blockchain technology saying that it is still in the premature stage. Blockchain technology is considered the driving force of the FinTech revolution to perform low-cost high-speed cross-border transactions.

The report notes: "61% of the central banks said a blockchain may not be necessary as they observed few efficiency gains during trials, given the technology is still in early stages of development.” On the other hand nearly 76% of respondents are uncertain whether "DLT will be able to deliver on its promise, especially in areas such as regulation”.

The report goes to mention some of the banks which are using DLT for cross-border transactions. Some of them are Project Jasper from the Bank of Canada, and Bank of Thailand's Project Khokha.

However, it goes to mention that "none of the central bank [DLT] case studies examined included the possibility of radically overhauling their payments systems in the near future. Most are satisfied with existing RTGS [real-time gross settlement] platforms. Central banks concluded that blockchain systems must improve before they can overcome issues of scalability and speed."