Central bank digital currencies (CBDCs) are facing a decline in enthusiasm from central bankers globally, despite increased research and development initiatives. According to the 2024 Future of Payments Survey by the Official Monetary and Financial Institutions Forum (OMFIF), support for CBDCs as a solution for enhancing cross-border payments has dropped significantly.
In the 2024 survey, only 13% of central bank respondents viewed CBDCs as a viable solution—down from 31% in 2023.
Preference Shifts Toward Instant Payment Systems
A growing number of central bankers are favoring interlinked instant payment systems over CBDCs. Approximately 47% of respondents highlighted instant payment systems, such as the U.S. FedNow service, as the preferred approach to streamlining international payments.
In stark contrast, stablecoins received zero votes for the second consecutive year, indicating limited confidence in their potential to enhance global financial infrastructure.
Geopolitical and Technical Challenges for CBDCs
The decline in CBDC enthusiasm coincides with the Bank for International Settlements (BIS) withdrawing from Project mBridge, a multi-CBDC initiative spearheaded by China and other countries outside Western geopolitical spheres. While the BIS denies political motivations, the move reflects growing concerns about the geopolitical implications of CBDC adoption.
Meanwhile, the survey reaffirmed the U.S. dollar’s dominance in global trade and reserves. Only 11% of central banks reported reducing dollar usage, as geopolitical uncertainty drives demand for the dollar as a safe haven.
Tokenization and Emerging Innovations
The survey also explored tokenization, with over 40% of central banks in developed markets identifying it as a promising innovation for future cross-border payment systems.
Tokenization could simplify compliance processes like Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, offering a streamlined alternative to the costly and outdated correspondent banking system.
Central banks are expected to explore tokenized solutions over the next three to five years, with projects like Agora piloting wholesale CBDCs for financial settlements.
Traditional Systems Still in Favor
Despite the potential of tokenization, traditional instant payment systems remain the dominant choice for central bankers. Initiatives like the BIS’s Project Nexus, which leverages the ISO 20022 standard, are creating frameworks to link global payment systems efficiently.
India’s Reserve Bank of India (RBI) exemplifies this cautious approach. The RBI is progressing with its e-rupee, a CBDC initiative, but Deputy Governor T. Rabi Sankar emphasized the importance of understanding the broader impact of CBDCs before wider adoption.
Global Progress in CBDCs
Globally, 130 countries—representing nearly 98% of global GDP—are actively exploring digital currencies, according to the Atlantic Council. Nations such as China, Jamaica, and Nigeria are leading in CBDC implementation, while others, including India, monitor developments before scaling their projects.
For now, however, the OMFIF survey suggests that legacy financial systems and instant payment solutions will continue to dominate the future of cross-border payments.
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