Most central banks have no plans to issue a digital version of their currency after studies left them unconvinced of the merits of e-money, a survey by the Bank for International Settlements (BIS) showed on Tuesday. Central banks have warned investors they could lose money on privately minted cryptocurrencies like Bitcoin, which have taken a hammering in recent months.
The survey from the BIS, a global forum for central banks, underscored policymaker caution over issuing central bank-backed digital currencies (CBDC). "At this stage, most central banks appear to have clarified the challenges of launching a CBDC but they are not yet convinced that the benefits will outweigh the costs," the BIS said.
Responses from 63 central banks that represent over 90 percent of global economic output and 80 percent of the world's population showed that much of the work done so far is "conceptual". Only five central banks have progressed to e-money pilot projects.
Sweden's central bank has been working on an "e-Krona" project since 2017 as the use of cash continues to decline in the country. The central bank wants to remain relevant as retailers say that accepting cash will become uneconomic for them. The Central Bank of Uruguay is evaluating a pilot programme it completed last year on a general purpose CBDC.
The European Central Bank and the Bank of Japan are meanwhile collaborating on "project Stella". ECB President Mario Draghi said in September that the euro zone's central bank has no plans to issue a digital currency because the underlying technology remains fragile and use of physical cash is still high in the 19-country bloc.
The Bank of England, Bank of Canada and Monetary Authority of Singapore also have a joint project. More than 85 percent of central banks say they are either unlikely or very unlikely to issue any type of digital currency in the next three years, the BIS said. Only one central bank said it was very likely to issue a digital version of its currency in the next six years.
Almost a quarter of the central banks said they have or will soon have powers to issue a digital currency, while a third do not, and about 40 percent are unsure if they have the necessary powers, the survey showed. "To meet the payment needs of the future, physical cash is unlikely to be the main answer," the Swiss-based BIS said.