Survey: One-Third of Central Banks Postponing Launch of Digital Currencies

Nearly a third of central banks have postponed plans to launch digital versions of their currencies, according to a study published this week by Reuters.

Central bank digital currencies (CBDCs) are back in the spotlight after one of US President Donald Trump's first moves was to ban work on a digital dollar.

The study was completed before Trump's announcement, but central banks that participated were asked if they were less interested in CBDCs given the problems surrounding these assets. According to the analysis, 67% of central banks have not changed their approach in the past year, three-quarters plan to issue a digital currency, while 19% have no plans to do so.

Other responses show different positions. The share of central banks inclined to issue a digital currency has fallen slightly, with the proportion now less likely to launch one standing at 15%, compared to zero in 2022.

"There is clearly a hesitation on this issue," says the study by the Official Monetary and Financial Institutions Forum (OMFIF), a London-based think tank, and German technology firm Giesecke+Devrient. The analysis notes: "Very few central banks have yet to make a decision to issue a digital currency, despite the intense activity in this area."

According to the study, 31% of institutions have postponed the launch of a CBDC, including almost half of those that had hoped to issue a digital currency in the next three to five years.

Proponents of digital currencies say they could make cross-border payments 24/7, in real time, and that they are a natural alternative to physical cash, which appears to be in decline. Opponents of CBDCs, however, say that advances in payments can be made using existing systems. There have also been public outcry that has focused on one of the main criticisms made by the US president - but rejected by central bankers - that governments could use them for spying.

The study found that "preserving the sovereignty of central bank monetary policy" remains the main argument for introducing CBDCs, especially in major economies such as the eurozone.

Giesecke+Devrient Currency Technology CEO Wolfram Seidemann noted that a senior European Central Bank (ECB) official recently said a digital euro would counterbalance Trump's focus on "stablecoins" - a type of cryptocurrency typically tied to the dollar.

Stablecoins are managed for profit by private groups. If they become dominant, the concern is that they would eliminate money, the power that countries gain by printing and holding their own currencies.

"I'm sure there will be similar views," Seidemann said, referring to the ECB's position. Another issue, he said, is the ongoing concern about privacy and the risk that almost anyone could end up using a CBDC.

Jamaica, the Bahamas, Nigeria and China had this issue, and it was the biggest concern for about 55% of central banks in the markets included in the cited analysis.

• Piero Cipollone, ECB: "The need for a digital euro is growing"

Eurozone banks need a digital euro to respond to US President Donald Trump's initiative to promote "stablecoins", Piero Cipollone, a member of the European Central Bank (ECB) board, said recently, quoted by Reuters.

Trump had previously announced, through an executive order, that he would "promote the development and growth of legal and legitimate stablecoins, backed by the dollar, globally", as part of a broader strategy on cryptocurrencies.

Cipollone stressed that this move would reinforce the need for the ECB to launch its own digital currency, stressing: "I think the key word here is "global'. This solution leads to further disintermediation of banks, which lose fees, lose customers. That is why we need a digital euro (...) The launch of a digital euro could become essential for maintaining the economic competitiveness of the eurozone".

Eurozone banks have expressed concerns that a digital euro could lead to a drop in deposits as customers move some of their cash into digital wallets guaranteed by the ECB, according to Reuters.

Recall that in June 2024, the ECB published its first progress report on the preparation phase of the digital euro. The project was launched by the Eurosystem (the ECB and the national central banks of the eurozone) in October 2021 and began with an investigation phase, during which possible design features of the new digital currency and its distribution mechanisms were analyzed.

In June 2023, the European Commission issued a legislative proposal on the establishment of a digital euro. In October 2023, the ECB Governing Council assessed the project under review as feasible and decided to enter its preparatory phase. The objective of this phase, which will last until 31 October 2025, is to create the necessary conditions for a potential issuance of the digital euro. According to the progress report, the second phase will include the finalisation of the single set of rules for the conduct of digital euro payments and the selection of providers that will provide the necessary platform and infrastructure for the new currency. The Eurosystem will also conduct additional testing and become more involved in technical aspects of the digital euro, such as off-line payments and an implementation plan. The Eurosystem's technical activities will be conducted in parallel with the legislative process for the adoption of the digital euro regulation. The European legislators (the Council of the EU and the European Parliament) will be able to adjust the legislative text in line with technical progress made by the Eurosystem, and the latter will also modify the technical standards to reflect any legislative amendments. Towards the end of 2025, the Eurosystem will decide whether or not to issue a digital euro, but will not do so until the legislative process has been completed.