Crypto is in the depths of a winter recently spurred by bankruptcy filings from some of the most prominent companies, including exchange FTX and crypto lender Celsius Network but these market conditions have only convinced countries to develop central bank digital currencies (CBDC), and no later than within 10 years, according to a Thursday report by the Official Monetary and Financial Institutions Forum (OMFIF).
A CBDC is a digital currency issued by a central bank. Two-thirds of the central banks OMFIF surveyed said they would issue a CBDC within 10 years and none said they would issue one later than that, according to OMFIF's annual report, "Future of Payments".
OMFIF is an independent think tank that focuses on global policy and investment issues involving central banking, economic policy and public investment, according to its website.
According to the report, 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 CBDCs. 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. Bank of England Deputy Governor Jon Cunliffe echoed those very words recently and suggested the U.K. may need to issue a CBDC.
Also, 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.
However, CBDCs 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.
UPDATE (Dec. 8 17:30 UTC): Provides background information on OMFIF.
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