Central Banks Wary of Issuing Own Cryptocurrencies
The Bank of International Settlements (BIS) recently published a survey indicating that many central banks are “proceeding cautiously” on issuing their cryptocurrencies. It also revealed that only a few are planning to do so in the near future.
Swiss-based BIS conducted a survey involving 63 members of the central banks regarding central bank digital currencies (CBDC), which is a form of digital currency issued by the government and not necessarily underpinned by blockchain technology, unlike bitcoin.
The survey showed – about 70 percent of the banks were involved in some activities related to the issuing of their own CBDC. The report collected views from central banks that are accountable for 80 percent of the world’s population.
Five central banks have already kicked off pilot projects, including the central banks of Sweden, South Africa, and Uruguay. BIS discovered that less than quarter now possess authority to issue their cryptocurrency in the coming term, whereas 40 percent remain doubtful.
As the report reads, “Only a limited number of central banks are proceeding to the pilot stage with CBDCs, and even fewer see issuance of a CBDC as likely in the short or medium term. At this stage, most central banks appear to have clarified the challenges of launching a CBDC, but they are not yet convinced that the benefits will outweigh the costs.”
Furthermore, the survey indicated that “central banks are proceeding cautiously, and also that they are collaborating and sharing the result of their work.”
Also, highlighting two types of digital currencies issued by the central banks – wholesale and general purpose.
Wholesale digital currencies are limited to specific functions including interbank payments. Whereas, the general ones are designed to replace cash and will be made available to the public. The report stated:
“Caution and collaboration will reduce the likelihood of unintended consequences. To meet the payment needs of the future, physical cash is unlikely to be the main answer. Most people will have to wait to use a central bank digital currency. However, central banks are working hard to make sure the wait is worth it.”
Meanwhile, central banks of Canada, South Africa, and Singapore are making efforts to replicate wholesale payment systems with the help of distributed ledger technology.
However, BIS added that the majority of central banks believe that the application of cryptocurrency “will remain minor” because of “low retail acceptance, compliance issues, better public understanding by the general public of the risk involved and, for some jurisdictions, outright bans.”