The number of central banks engaged in central bank digital currency (CBDC) activity rose slightly during 2022 with ‘almost a quarter’ undertaking retail CBDC pilots – but the 12 months of last year saw no new retail CBDCs actually launched, according to a Bank for International Settlements (BIS) report.
‘Making headway – Results of the 2022 BIS survey on central bank digital currencies and crypto’ is released today (10 July) based on a survey of 86 central banks.
The sample size and findings are similar to a BIS report one year previously, which found that 90 per cent of the 81 central banks that responded were exploring CBDCs and more than half were developing them or running concrete experiments.
The share of central banks engaged in CBDC work rose to 93 per cent during 2022, with 18 per cent of respondents indicating that they are likely to issue a retail CBDC ‘in the near term’, according to BIS’s new stocktake.
Despite growing global interest in CBDCs, the Bahamas, Eastern Caribbean, Jamaica and Nigeria remain the only central banks so far to have taken the plunge and issued a ‘live’ retail CBDC, the 32-page report states (referencing other sources dated January 2023).
RELATED ARTICLE CBDC ‘momentum’ revealed in survey of 81 central banks – our article (6 May 2022) on the previous year’s BIS survey
Mixed progress
The survey, which BIS was undertaking for the sixth year and had the highest-yet response rate, was distributed in October 2022. The cut-off for replies was end-December 2022.
‘Compared to last year, some central banks have become more likely to issue a retail CBDC within the next three years, while others indicated to be less likely to do so,’ the analysis notes.
The share of central banks likely to issue a wholesale CBDC (a CBDC for inter-bank settlement) in the short term more than doubled compared to the previous year.
The results indicate that emerging market and developing economies (EMDEs) are more advanced in their CBDC work than advanced economies (AEs): all current live CBDCs are issued in EMDE jurisdictions. Moreover, the share of EMDE central banks piloting a retail (29 per cent) and wholesale (16 per cent) CBDC is almost twice as high as in AEs (18 per cent and 10 per cent, respectively)
The survey suggests that there could be 15 retail and nine wholesale CBDCs publicly circulating in 2030.
CBDC issuance requires a legal framework that provides the authority to do so. Compared with last year, the share of central banks with such a legal authority increased marginally to 27 per cent (from 26 per cent, which was up from 18 per cent the year before). About eight per cent of jurisdictions are currently changing their laws or clarifying legal authority to allow for CBDC issuance (down from 10 per cent the previous year). One quarter of central banks say they lack the required legal foundation for CBDC issuance and about 40 per cent are ‘unsure’ – the same findings as the previous year’s survey.
Central banks participating in the survey for the first time included Algeria, Djibouti, Finland, Ghana and Iceland.
RELATED ARTICLE Think you know CBDCs? An A(CID) to Z(KP) test – an article (26 June 2023) delving into the Bank of England’s 86-page ‘digital pound technology working paper’ to highlight some of the technical considerations (and acronyms) facing CBDC architects
‘Security and resilience framework’
In a separate development, a ‘security and resilience framework for CBDC systems’ has been published by the BIS Innovation Hub’s Nordic centre.
The framework, developed as part of the BIS Innovation Hub Nordic centre’s multi-stream ‘Project Polaris’ work, aims to help central banks in ‘designing, implementing and operating secure and resilient CBDC systems to mitigate the operational, legal and reputational risks facing central banks from cyber threats or operational failures.’
‘Many central banks already have robust cyber security and resilience measures in place and adhere to the highest of industry standards in controls and risk management,’ the 68-page report notes. ‘However, risks cannot be fully eliminated and it is critical that senior leadership be aware of the potential new and elevated level of threats and risks facing CBDC systems so an appropriate risk management and mitigation strategy can be established.’
The Nordic centre simultaneously published a 51-page ‘Closing the CBDC cyber threat modelling gaps’ report, produced in conjunction with the BIS Cyber Resilience Coordination Centre, analysing several notable distributed-ledger technology (DLT) attacks in the DeFi (decentralised finance) domain.
*** A ‘Cybersecurity for Central Bank Digital Currencies (CBDCs)’ conference is being organised by the BIS Innovation Hub Nordic Centre, in conjunction with the BIS Cyber Resilience Coordination Centre, on 8-9 November in Switzerland.
FURTHER READING
Global Government Fintech’s Digital Currencies section
Central bank digital currencies: checking out conditions for take-off – a write-up of a session on CBDCs at the Global Government Fintech Lab 2023 (held in Dublin, Ireland, on 18 May) that featured representatives from the European Central Bank, Bank of England and Microsoft (event knowledge partner) discussing the policy and technology considerations most important to CBDC architects
