Countries with digitised and innovative economies are more likely to be developing central bank digital currency (CBDC) projects while those with a larger informal economy are tending to focus on creating retail CBDCs, a working paper published by the Bank for International Settlements (BIS) reports.

‘Rise of the central bank digital currencies: drivers, approaches and technologies’ examines ongoing CBDC projects around the world, looks at the economic and institutional motives behind them, and asks how such currencies might progress into design and implementation.

The paper surveys CBDC research and development work globally, the technical approaches and designs different central banks are exploring, and the CBDC policies of relevant institutions.

It focuses on three CBDC projects in particular: China’s Digital Currency Electronic Payments (DC/EP), Sweden’s e-Krona and the Bank of Canada’s CBDC contingency plan.

In addition to identifying the relationship between CBDC development and economic context, the paper’s key findings include:

• None of the projects surveyed seek to replace cash; all aim to offer a digital complement.
• An increasing number of central banks are considering hybrid or intermediated architecture where the private sector manages customer-facing activity, with only a few considering direct designs in which the central bank takes on some of the customer-facing side.
• Current proofs of concept tend to be based on distributed ledger technology rather than conventional infrastructure.
• Access frameworks tend to be based on account identification rather than allowing for token-based anonymity.

The 44-page white paper also incorporates detailed data in visual form drawn from an extensive research and development database, from other publications and from more than 16,000 central bank statements about CBDCs.

‘Rise of the central bank digital currencies: drivers, approaches and technologies’ can be downloaded here.

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