Interest in CBDC has grown in response to changes in payments, finance and technology, as well as the disruption caused by Covid-19. A 2021 BIS survey of central banks found that 86% are actively researching the potential for CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects.
In simple terms, a central bank digital currency (CBDC) would be a digital banknote. It could be used by individuals to pay businesses, shops or each other (a “retail CBDC”), or between financial institutions to settle trades in financial markets (a “wholesale CBDC”).
Central banks are exploring whether CBDC could help them to achieve their public good objectives, such as safeguarding public trust in money, maintaining price stability and ensuring safe and resilient payment systems and infrastructure.
If successful, CBDCs could ensure that, as economies go digital, the general public would retain access to the safest form of money – a claim on a central bank. This could promote diversity in payment options, make cross-border payments faster and cheaper, increase financial inclusion and possibly facilitate fiscal transfers in times of economic crisis (such as a pandemic).
The BISIH intends to contribute to this area through applied technology research, proofs of concept (POCs) and prototypes with central banks around the world.
Read More: Central bank digital currency (CBDC)