FameEX Hot Topics | BIS Survey: Vast Majority of Central Banks Worldwide Actively Developing CBDCs

Prominent economist and best-selling author Jim Rickards has strongly criticized the Biden administration, holding it responsible for undermining the U.S. dollar's status as a reserve currency. With 35 years of investment expertise, Rickards contends that President Joe Biden's actions are leading to the marginalization of the dollar, as the BRICS bloc proposes a common currency to be unveiled on August 22.  Rickards expressed his views on social media, labeling Biden as a "world historic figure" who has successfully "destroyed the dollar," emphasizing the emergence of a potential BRICS-wide currency that could rival the dollar. This currency would facilitate economic transactions among Brazil, Russia, India, China, and South Africa.

According to Rickards, the proposed BRICS currency will be backed by gold and implemented in stages. He cites reports from the Russian embassy in Kenya as supporting evidence. However, Leslie Maasdorp, Vice President and CFO of the New Development Bank (BRICS bank), has countered Rickards' claims, asserting that there is no immediate push to establish a common currency and that any such initiatives would be part of a long-term vision. Rickards further predicts the merging of the BRICS bloc and the Shanghai Cooperation Organization (SCO) into an unnamed cooperative group. He believes that the size and influence of this organization will encourage other countries to join, ultimately undermining the U.S. dollar's status as a reserve and transactional currency.

Despite his concerns, Rickards suggests that the dollar will persist as a secondary currency but will experience marginalization. This aligns with his predictions outlined in his 2011 best-selling book, Currency Wars: The Making of the Next Global Crisis, where he anticipates a gradual transition toward a multicurrency world as the dominance of the U.S. dollar wanes. Rickards is not alone in issuing warnings about the potential decline of the dollar. Investor Jim Rogers, famous for accurately predicting the 2008 financial crisis in 2002, has also expressed concerns about the consequences of the dollar's demise, highlighting potential inflation and debt issues that could adversely affect the United States.

While Rickards' assertions raise concerns about the future of the U.S. dollar, it is crucial to approach the topic with a balanced perspective. The precise impact on the dollar and the emergence of alternative currencies will unfold over time, influenced by various complex economic and geopolitical factors. It remains to be seen how significant these developments will be and whether they will genuinely challenge the dollar's global dominance.The Bank for International Settlements (BIS), often referred to as the bank of central banks, has released the results of its 2022 survey focused on central bank digital currencies (CBDCs) and cryptocurrencies. The survey, encompassing 86 banks, revealed that an overwhelming 93% of them were engaged in CBDC-related work to varying degrees.

In its publication titled "Making Headway," the BIS highlights that more than half of the surveyed central banks were actively conducting concrete experiments or working on pilots related to CBDCs. This indicates a diminishing level of uncertainty surrounding the future issuance of CBDCs. However, there is a divergence in perspectives among central banks, with some being less inclined to issue retail CBDCs within the next three years while others are more inclined.

The concept of wholesale CBDCs, designed for use as a payment mechanism between private banks, has gained increasing acceptance. The survey reveals that the proportion of central banks likely to issue this form of CBDC has more than doubled since the previous survey. Motivations for CBDC issuance vary across central banks. One key driver is the desire to enhance cross-border payments. In emerging markets and developing economies, CBDC research is primarily motivated by efforts to promote financial inclusion and address related challenges.

The rise of stablecoins and cryptocurrency assets has spurred traditional financial institutions to pursue innovation in the realm of CBDCs. The survey findings indicate that 60% of the consulted central banks have expedited their CBDC work due to the existence of these alternative digital currencies.
Stablecoin issuance has also raised concerns among currency issuers regarding potential economic effects. The BIS poll reveals that 70% of central banks are researching the potential instability that stablecoins could introduce, while 40% have evaluated the extent of crypto asset and stablecoin usage within their jurisdictions.

However, the current usage of stablecoins and crypto assets remains predominantly limited to decentralized finance platforms and cryptocurrency exchanges. Central banks report that these alternative currencies are rarely utilized for remittances and retail payments. Overall, the BIS survey underscores the significant engagement of central banks in CBDC-related work, indicating a growing acceptance and exploration of this transformative technology. Central banks worldwide are recognizing the evolving landscape of digital currencies and the potential impact they can have on the global financial system, which continues to drive research and experimentation in this domain.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.