Central bankers are losing enthusiasm for central bank digital currencies (CBDCs) despite a continued rise in research efforts. While CBDCs once appeared to be a promising tool for enhancing cross-border payments, their popularity has declined sharply, according to the latest annual Future of Payments survey by the Official Monetary and Financial Institutions Forum (OMFIF). The report detailed that only 13% of respondents in 2024 favored CBDCs as a solution, down from 31% in 2023. Central Bankers Favor Interlinking Instant Payment Systems Instead, nearly half of the surveyed central bankers (47%) chose interlinking instant payment systems, such as the U.S. FedNow service, as the preferred path forward. Stablecoins, by contrast, received zero votes for the second consecutive year, reflecting a lack of confidence among central bankers in their ability to enhance the global financial infrastructure. The decline in CBDC interest coincides with the Bank for International Settlements (BIS) withdrawing from Project mBridge, a multi-CBDC project led by China and other nations less aligned with Western geopolitical interests. While the BIS denied political motivations, the move underscores tensions surrounding the adoption of CBDCs on the global stage. Furthermore, the survey emphasized the U.S. dollar’s enduring dominance, with just 11% of central banks reporting a reduction in dollar usage, largely due to geopolitical uncertainties driving demand for the dollar as a safe haven. What will shape the future of cross-border payments? With the market projected to reach US$290 trillion by 2030, EY’s latest report on the future of global payments is an important deep dive into drivers behind this growth and the innovations reshaping the industry. Swift’s… pic.twitter.com/BJK0Vnhug2 — Swift (@swiftcommunity) November 29, 2024 The survey also highlighted challenges facing the correspondent banking system, which has long facilitated international settlements but is increasingly seen as outdated and costly due to complex Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements. The delayed adoption of the ISO 20022 messaging standard is likely to exacerbate this decline, pushing central banks to explore alternatives like tokenization. Over 40% of developed-market central banks view tokenization as a promising innovation, with plans to begin work on it within the next three to five years. Tokenized systems, which streamline compliance checks, could redefine cross-border payments. Traditional Instant Payment Systems Remian Preferred Solution Despite this, traditional instant payment systems remain the preferred solution for central bankers. The BIS’s Project Nexus, which relies on the ISO 20022 standard, is creating a unified platform for linking instant payment systems globally. Meanwhile, projects like Agora, involving wholesale CBDCs, are exploring tokenized solutions. However, the OMFIF survey suggests that for now, the future of cross-border payments lies firmly within the realm of legacy financial systems, rather than blockchain-based innovations. Just recently, India’s Reserve Bank (RBI) announced that it is moving forward cautiously with the rollout of its CBDC, the e-rupee. While the RBI sees the potential of CBDCs in reshaping the financial landscape, Deputy Governor T. Rabi Sankar stated that a full understanding of the technology’s impact is necessary before expanding its usage. More than 130 countries, representing nearly 98% of global GDP, are actively exploring digital currencies, according to the Atlantic Council. China, Jamaica, and Nigeria are among the nations already advancing their CBDCs, with India closely monitoring global developments as it progresses with its digital currency. The post Central Bankers’ Enthusiasm for CBDCs Wanes Despite Growing Research: OMFIF Survey appeared first on Cryptonews .
