Recent Survey Shows the Opinions of Central Banks Regarding CBDCs
Over the last few months, media reports have indicated that most of the world’s central banks are investing time and money into studying central bank-backed digital currencies, alongside their potential for the market.
Now, a report published by IBM and the Official monetary and Financial Institutions Forum, also known as OMFIF, showcases the results of a survey concerning the opinion of banks on CBDCs. A total of 23 central banks participated, and shared insight regarding their opinion of the CBDC market. 13 of these banks are based in countries with advanced economies, whereas the rest are based in developing countries and other emerging markets.
In regards to the findings, roughly 50% of the surveyed banks stated that they were concerned about private CBDC competitors, capable of completely undermining the monetary sovereignty of the world’s countries. CBDC competitors represent your average digital currencies, such as Bitcoin, Ethereum and even Libra in this case. According to one respondent, central banks fear that “numerous private cryptocurrencies can emerge in competition, and thus issue an alternative digital currency that can gain adoption, and be classed as senior on the market.” The problem here is that a private cryptocurrency can theoretically “erode the central bank’s ability to conduct monetary and financial stability policy”.
Apart from this aspect, the survey has offered several other interesting findings. For instance, 82% of banks stated that their main concern on financial stability is the increasing speed of digital bank runs.
In regards to retail CBDCs, 43% of surveyed banks stated that their CBDC solutions would be national, thus they aren’t looking for international integration of these digital currencies. 64% of central banks also seem to prefer CBDCs that are value-based, in comparison to CBDCs that are based on accounts.
45% of respondents believe that central bank digital currencies capable of bearing interest would lower the amount of commercial bank money.
An aspect that most central banks seem to agree on, is the belief that the role of central banks is not bound to change once CBDCs are released on the open market. 83% of banks seem to share this view.
In terms of the main arguments backing the launch of CBDCs, numerous banks stated that these new financial instruments are necessary to ensure their competitiveness in an actively-changing market. Another argument is the need to improve cross-border payments, since the era of globalization is here.
The survey also concluded that it is very likely for a CBDC to be launched within the next 5 years. Rumours and other media reports indicate that a CBDC may be released even earlier, especially if we consider China’s recent actions in this direction. We must also keep in mind the fact that digital payments are becoming more and more popular, as billions of dollars are transacted via the internet on a daily basis.
According to the OMFIF chairman, Phillip Middleton, “The concept of retail CDBCs has moved rapidly from being the thought experiment of technical experts and philosophers to the subject of boardroom debates focused on tangible, near-term reforms”.
Based on everything that has been outlined so far, this market is quickly emerging, and may become a reality within the next couple of years. It’ll certainly be interesting to see how CBDCs will compete with traditional and decentralized cryptocurrencies.