Despite the recent challenges faced by the crypto market, the number of central banks planning to launch Central Bank Digital Currencies (CBDCs) has doubled since last year. A survey conducted by the Bank for International Settlements (BIS) reveals that almost a quarter of central banks globally are currently piloting a retail CBDC, with over two dozen state-backed digital currencies set to roll out by 2030. While concerns over the impact of crypto assets on financial stability persist, the emergence of stablecoins and other crypto assets has accelerated the development of CBDCs according to 60% of the central banks surveyed.

Growing Adoption of CBDCs:

CBDCs, digital forms of a nation’s or economic zone’s currency issued by central banks, are gaining momentum worldwide. Nigeria, Jamaica, the Bahamas, and the Eastern Caribbean have already issued CBDCs, and many other countries are set to follow suit. By the end of the decade, 15 retail CBDCs designed for consumer use and nine wholesale CBDCs facilitating transactions between financial institutions are expected to launch in both emerging and established economies.

Crypto Challenges and Diverging Approaches:

While the crypto market’s volatility and challenges have not deterred central banks from exploring CBDCs, not all banks are convinced of the need for state-backed digital currencies. The BIS survey reveals that 93% of central banks are investigating CBDCs to some extent, but an increasing number of banks have indicated that they do not plan to issue a digital currency in the near future. The report notes a clear divergence among central banks, with some becoming more likely to issue a CBDC within the next three years and others expressing reduced interest in doing so.

Regulatory Measures to Address Risks:
Recognizing the potential risks posed by stablecoins and crypto assets to financial stability, various international bodies, including the Committee on Payments and Market Infrastructures (CPMI), the International Organization of Securities Commissions (IOSCO), the Financial Stability Board (FSB), and the Basel Committee on Banking Supervision (BCBS), have published updated guidelines and standards. These regulatory measures aim to strengthen and coordinate approaches to contain the risks associated with stablecoins and crypto activities more broadly.

Despite the challenges faced by the crypto market, central banks worldwide are forging ahead with plans to launch CBDCs. The increasing adoption of CBDCs reflects a recognition of their potential benefits and the need to provide a secure and regulated digital currency option. While concerns remain, regulatory efforts are underway to address the risks associated with stablecoins and cryptoassets. As central banks continue their exploration of CBDCs, the global financial landscape is set to undergo significant transformation in the coming years.