Central Banks Move Closer to Issuing Digital Currencies

Four score and seven years ago, central bankers declared their intent to launch digital currencies. Okay it was this month.

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The Bank for International Settlements (BIS) polled 66 central banks on their plans to issue digital currencies. The simultaneously vague yet definitive results:

• "Some 80% of central banks (up from 70%) are engaging in some sort of work."
• "Some 40% of central banks have progressed from conceptual research to experiments, or proofs-of-concept; and another 10% have developed pilot projects."

It's clear that central bank digital currencies (CBDC, the hottest thing since CBD) are moving past the whitepaper phase. 10% of the surveyed banks representing a fifth of the world's population said they're likely to issue a general purpose digital currency in the next one to three years.

• Also noteworthy: Emerging market economies are generally more eager to issue CBDCs.

Behind every CBDC is a great story

The stated reasons: financial stability, monetary policy implementation, expanding access to the under- or unbanked, domestic and cross-border transfer efficiency, and safer, more robust payment stacks.

The unstated reasons: Data collection company Facebook is still trying to launch Libra, its digital currency. Data collection country China is expected to soon lift the wraps on a digital renminbi.

So what to expect?

About three-fifths of central banks are looking into stablecoins, which are cryptocurrencies pegged to stable assets such as gold or the U.S. dollars stockpiled under your mattress. Stablecoins are engineered to avoid the notorious volatility of cryptocurrency OG bitcoin.

Zoom out: To some extent, both CBDCs and bitcoin are based on blockchain technology and could be used as cash substitutes. The similarities basically end there. Because they're issued by the state, CBDCs go against the decentralized, jaded ethos of cryptocurrency loyalists.