By Tom Wilson
LONDON (Reuters) – A rising number of central banks are likely to issue their own digital currencies in the next few years, research by the Bank for International Settlements (BIS) showed on Thursday, as interest in the technology heats up.
Some 20% of 66 central banks surveyed by the BIS said they were likely to issue a digital currency within the next six years, up from around 10% a year earlier. One in ten said they were likely to do so within the next three years.
In all, 80% of central banks said they were looking at the technology, up from seven in ten surveyed last year.
As Facebook’s efforts to launch its Libra cryptocurrency pour fuel onto debates over who will control money in the future, major countries have stepped up the pace at which they are looking at central bank digital currencies (CBDCs).
CBDCs are traditional money, but in digital form, issued and governed by a country’s central bank. By contrast, cryptocurrencies such as bitcoin are produced by solving complex maths puzzles, and governed by disparate online communities instead of a centralised body.
Five central banks, including those in Japan, Britain and the euro zone, said on Tuesday they were joining forces to look at the case for issuing CBDCs. The challenge posed by Libra was likely to have catalysed the move, a former Bank of Japan executive told Reuters.
Before Facebook unveiled Libra in June, central banks had been sanguine about cryptocurrencies, mostly because of their relatively small markets and limited usage by the public.
But the prospect of Facebook’s near-2.5 billion users using Libra, due for launch this year, has stoked worries about the impact of a widely-used and privately-run cryptocurrency on nation states’ control over monetary policy.
Still, the BIS found that only around 10% – all from emerging market economies – have developed pilot projects or started looking at operational or legal questions surrounding CBDCs, suggesting that the technology remains some way off implementation.
“There is no evidence of a widespread or general move to expand this research into experimentation and pilot arrangements,” it said.
Of the central banks surveyed by the BIS, around a third were from advanced economies and the remainder from emerging markets.
Those from emerging economies tend to have a stronger motivation to issue CBDCs that can act as a substitute for or complement to bank notes, the BIS said, partly because of concerns over the efficiency and safety of payments using traditional cash.
The Hong Kong and Thai central banks said on Wednesday they had moved closer to using CBDCs to make cross-border payments more efficient.
(Reporting by Tom Wilson; Editing by Toby Chopra)