08 January 2019

BIS paper: Proceeding with caution – a survey on central bank digital currency

A survey of central banks shows that a majority are collaboratively looking at the implications of a central bank digital currency. Although many have reached the stage of considering practical issues, central banks appear to be proceeding cautiously and few report plans to issue a digital currency in the short or medium term.

Most central banks are conducting research into CBDC. Many are progressing from conceptual work into experimentation and proofs-of-concept, including in cooperation with other central banks. Nonetheless, motivations for issuing a CBDC are largely idiosyncratic (eg falling availability of cash in a jurisdiction). This has meant that 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. Those that do see clear benefits are predominantly from EME jurisdictions.

From survey responses, this seems to be because financial inclusion projects create a clear mandate for central bank action, and a lack of current infrastructure limits the disruption a CBDC could create while simultaneously encouraging the use of new technology.  

The trends identified in the survey are likely to continue. Different central banks will continue to move at different speeds. This creates a potential risk for spillover effects across borders (CPMI-MC (2018)). However, the evidence from this survey is that central banks are proceeding cautiously, and also that they are collaborating and sharing the results of their work. 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. Yet, most people will have to wait to use a CBDC. However, central banks are working hard to make sure the wait is worth it.

Full publication

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