NBC among seven ASEAN central banks working on digital currencies: BIS

PHNOM PENH: The Bank for International Settlements (BIS) says the National Bank of Cambodia is among seven Southeast Asian central banks involved in central bank digital currency (CBDC) development.

In a report published Wednesday, the BIS said 93 percent of 86 central banks surveyed late last year were working on CBDC payment mechanisms. More than half were running concrete tests or working on pilots. The latest survey comes three years after former Bank of Japan Policy Board member Sayuri Shirai found that the National Bank of Cambodia was among three central banks leading the world in retail CBDC development.

The others were the People's Bank of China and Sveriges Riksbank in Sweden. UNCERTAINTY FADING “Uncertainty about short-term issuance of a CBDC is fading,” the BIS report said. In addition to Cambodia, the survey found that central banks and monetary authorities in Brunei, , Malaysia, the Philippines, Singapore, and are now “engaged in some form” of CBDC work.

Among all central banks surveyed, work on retail CBDCs was more advanced than on wholesale CBDCs — with almost a quarter piloting a retail CBDC. “More than 80 percent 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 report said. “The survey suggests that there could be 15 retail and nine wholesale CBDCs publicly circulating in 2030.” EMERGING MARKET AND DEVELOPING ECONOMIES ‘MORE ADVANCED' THE BIS said 58 of the central banks surveyed were in emerging market and developing economy (EMDE) jurisdictions and 28 in advanced economies.

EMDE central banks are “more advanced” in their CBDC work, the report said, noting that the four current “live” CBDCs have all been issued in EMDE jurisdictions — by central banks in the Bahamas, Eastern Caribbean, Jamaica, and Nigeria. Moreover, the share of EMDE central banks piloting CBDCs is almost twice as high as in advanced economies. MORE ISSUES EXPECTED OVER NEXT THREE YEARS The share of central banks likely to issue a retail CBDC within the next three years grew to 18 percent, up from 15 percent in the last survey in 2021. The likelihood of wholesale CBDC issues doubled from 8 percent to 16 percent over the same period.

For retail CBDC issues, the survey found that motives among EMDE and advanced economy central banks were converging. “Domestic payments efficiency and payments safety have become nearly equally important as motivations in both,” the report said. Both “also attach about the same weight to the financial stability and cross-border payments efficiency reasons.” FINANCIAL INCLUSION MOTIVATIONS But there are two key differences — retail CBDC work in EMDE central banks is “more often driven by financial inclusion-related motivations” compared with central banks in advanced economies.

EMDE central banks also “assign a higher weight to monetary policy implementation as a reason to explore or develop a CBDC.” As for stablecoins and other crypto assets, the survey found that they are “rarely used for payments outside the crypto ecosystem.

“Some 60 percent of surveyed central banks reported that they have stepped up their CBDC work in response to the emergence of crypto assets,” the report said. CRYPTO MARKET RISKS “The turbulence in the crypto market in 2022 and the beginning of 2023 has shown that crypto assets pose risks when not properly designed and regulated. “Continued monitoring will help central banks to identify emerging risks and promptly address such risks with effective standards, oversight, and policies.”

SURVEY DEFINITIONS The BIS defines a CBDC as “a digital payment instrument denominated in the national unit of account, which is a direct liability of the central bank.” A retail CBDC is for use by households and firms for everyday transactions whereas a wholesale CBDC is for transactions between banks, central banks, and other financial institutions. Crypto assets are defined as “a type of private sector-issued digital asset that depends primarily on cryptography and distributed ledger or similar technology.”

In contrast to CBDCs, they don't represent a claim on a central bank. Set up in Switzerland in 1930 to settle German reparations arising from World War I, the BIS is the world's oldest international financial institution. Long dominated by advanced economies, membership expanded rapidly after the Asian financial crisis of 1997 to include dozens of EMDE central banks. Current membership covers 63 jurisdictions.

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