The head of BIS Innovation said that CBDCs will continue to progress despite market turmoil. Some big economies are already working on it.
The last year of 2022 witnessed one of the most brutal bear markets in the history of crypto. Nearly a trillion dollars worth of investors’ wealth was wiped out in a year’s time with Bitcoin and several other altcoins correcting to the tune of 60% and more. However, the market has shown a good recovery since the beginning of 2023. So far, the BTC price is up by more than 40% while some of the altcoins have gained as much as 70-80%. The new innovation head at the Bank of International Settlements (BIS) has predicted that cryptocurrencies and central bank digital currencies (CBDCs) will emerge from last year’s turmoil. In her latest statement to Reuters, Cecilia Skingsley, the new head of the BIS ‘Innovation Hub’, said:
“I would assume that the industry will learn from these failures and they will come up with new things”.
Cecilia, who’s also a former Swedish central banker added that the market turmoil hasn’t seemed to affect the central bank’s plans for nationally-issued digital currencies (CBDCs) in the coming years. BIS being the global central bank umbrella body has been coordinating many of the international experiments around CBDCs. Different banks are working on different use cases of CBDCs.
Some are for retail use, some CBDCs are for interbank transfers while the third category of CBDCs involves wholesale use. “Everything I hear is that those who have these projects are pushing on with them,” Skingsley said.
Major Global Economies Working on CBDCs
So far, 11 countries have already launched their central bank digital currencies. However, 100 more countries are currently exploring the potential use case of CBDCs.
Among top economies, China has been leading with testing the Digital Yuan CBDC across the country. On the other hand, the European Central Bank has given a go-ahead for full-scale tests of the CBDC. The US Federal Reserve is also doing some very initial stage research, while countries like Australia, Britain, India, Brazil, Russia, and South Korea have taken sizeable steps.
Of course, the CBDCs will come with more powerful tech that will make cross-border payments instant and at a lower cost. But Skingsley said that the new form of e-money will be fully interoperable only between geopolitically aligned countries.
“We will never have full interconnectedness. There will be too many frictions and not all countries in the world will be prepared to cooperate fully with all the other countries in the world – that’s the reality,” she added.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
