A newly released survey and report from the Bank for International Settlements (BIS) claims if widely used, cryptoassets and stablecoins may threaten financial stability.
The BIS published a new survey and report detailing the state of global CBDC (central bank digital currency) adoption and central banks’ view and plans regarding CBDCs.
The report, entitled “Making Headway – Results of the 2022 BIS Survey on central bank digital currencies and Crypto,” finds the number of central banks planning on launching CBDC in the near future has doubled since the previous year, despite the chaos in the market.
In its report, the BIS, however, warned of the risks of using cryptoassets for payments. It said:
If widely used for payments, cryptoassets, including stablecoins, may constitute a threat to financial stability.
While accepting the reality of widespread CBDC introduction, the BIS and other global regulators will issue guidelines to mitigate the danger it associates with the industry. The BIS explained:
To strengthen and coordinate regulatory approaches to contain their risks to the financial system, the CPMI, IOSCO, FSB and BCBS published updated or new guidance and standards for stablecoins or crypto activities and markets more broadly.
Through its research, the BIS found that almost a quarter of all central banks are currently piloting retail CBDCs. The BIS expects over two dozen such state-backed digital currencies to roll out by the decade’s end.
BIS Expects 15 Retail, Nine Wholesale CBDCs To LaunchCBDCs have already been issued by Nigeria, the Bahamas, Jamaica, and parts of the Caribbean, and according to the survey, those regions will soon be joined by several other territories.
The report explains that work on retail CBDCs is more advanced than wholesale CBDCs.
The BIS report reads:
Work on retail CBDC is more advanced than on wholesale CBDC: almost a quarter of central banks are piloting a retail CBDC. More than 80% of central banks see potential value in having both a retail CBDC and a fast payment system, mostly because a retail CBDC has specific properties and may offer additional features.
The BIS expects that by the end of 2030, 15 retail CBDCs, and nine wholesale CBDCs will be circulated in established and emerging economies.
According to the report, 60% of surveyed central banks explained the arrival and rise of stablecoins had accelerated their development of CBDCs.
2022 Crypto-Chaos Leaves Central Banks Divided2022’s market spiral, however, did not convince all central banks of the necessity of CBDCs.
The report find that while 93% of all central banks are exploring CBDCs in some way, an increasing number of those banks expressed with greater conviction that they would not issue a state-backed digital currency soon.
The report states:
A clear divergence has emerged: compared to last year, some central banks have become more likely to issue a CBDC within the next three years, while others indicated to be less likely to do so.
BIS Backs Tokenisation, But Says Crypto is a “Flawed System”The BIS, considered by many as the central bank of central banks, recently released its plan for a global “unified ledger” that would support CBDCs and tokenized assets.
According to the organization, tokenization offers a “major leap” in the financial system, calling it “the next logical step.” While it advocated for a centralized approach to the future of the monetary system, it dismissed decentralized cryptocurrencies as a “flawed system.” It said:
Crypto and decentralized finance (DeFi) have offered a glimpse of tokenization’s promise, but crypto is a flawed system that cannot take on the mantle of the future of money.
Moreover, the BIS argued that “crypto has collapsed”, and the successful use of tokenization relies on the trust provided by central banks.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
