Crypto is in the depths of a winter recently spurred by bankruptcies from some of the most prominent companies, like exchange FTX and crypto lender Celsius but these market conditions have only convinced countries to develop Central Bank Digital Currencies (CBDC) and no later than within 10 years, a report by the Official Monetary and Financial Institutions Forum (OMFIF) said on Thursday.
A CBDC is a digital currency issued by a central bank. Two thirds of the central banks that OMFIF surveyed said that they would issue a CBDC within ten years and none said they would issue one later than that, OMFIF’s annual report ‘Future of Payments’ showed. Generally 35% of central banks were more inclined to issue a CBDC despite recent events in crypto, while none were less inclined to issue one, the survey of 18 central banks found.
Central banks have been ramping up their efforts to look into a CBDC lately. The Atlantic Council said that 105 countries are exploring a CBDC, representing 95% of the global gross domestic product, up from 35 countries in May 2020. The Bahamas, Nigeria, Eastern Caribbean and Jamaica have already issued a CBDC, the report said, while China is further along than most other nations in its CBDC trials.
“Overall, if central banks decide to issue a CBDC, they expect deployment to come sooner rather than later,” the report said.
The main reasons that central banks gave in the report for wanting to issue a CBDC were that they wanted to preserve the central banks role and boost financial inclusion. However, many central banks have suggested that the crash of FTX only showed the need for a CBDC as a safe alternative solution. The Bank of England’s Deputy Governor Jon Cunliffe echoed those very words recently and suggested that the U.K. may need to issue a CBDC. Plus, Fabio Panetta, a member of the executive board of the European Central Bank said on Monday that a digital euro could be a more “risk free and dependable” digital settlement asset than crypto.
Read more: ECB Official Says Energy-Intensive Crypto Should Be Banned
However, CBDC’s are not without their risks and challenges. They could expose economies to “greater systematic financial risk brought on by volatility and sudden foreign exchange fluctuations,” the report said. Plus, central banks will have to workout how they can use a CBDC to ensure inclusion if not everyone has access to digital technology, the report said.
