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The 2022 PwC Central Bank Digital Currency (CBDC) Global Index analyses and ranks the top retail and wholesale CBDC projects. The Index evaluates the current stage of CBDC project development also taking into account central bank opinion and public interest.
At first glance, it may seem that little has changed in the CBDC index from last year. This undoubtedly reflects the scale, breadth and complexity of the underlying debate which ranges from the impact on credit creation, cross border payments through to inclusion and controlling financial crime. Yet, it is estimated that over 80% of central banks globally are considering launching a CBDC or have already done so.¹
Overall, retail CBDC projects worldwide have reached greater maturity levels than wholesale projects, but the past year has seen progress on a number of successful wholesale pilots.
1Rise of the central bank digital currencies: drivers, approaches and technologies, BIS working paper, No 880, August 2020 (updated January 2022) by Auer, R, G Cornelli and J Frost.
Top three trends to watch out for in 2022
Global CBDC projects continue at pace
- Over 80% of central banks are exploring CBDCs, for either retail or wholesale purposes.
- Several retail CBDC projects are now live or tested in a live pilot environment, ahead of their formal launch.
- Wholesale CBDC projects have not yet reached the same maturity level. However, many successful pilots have been reported on over the last 12 months.
- The speed of research, testing and implementation is set to intensify in 2022. This is particularly the case in developing countries where financial inclusion is often one of the key expected outcomes for a retail CBDC.
User stories are beginning to emerge
- User stories relating to the live or near-live CBDC projects begin to emerge from Nigeria, The Bahamas and Mainland China.
- In Nigeria and The Bahamas, all residents can access CBDCs through digital wallets and payment cards. In both countries, the adoption of a CBDC is expected to materially increase financial inclusion through private sector innovation.
- In Mainland China, near-live pilot programmes are available in several large cities. During the 2022 Winter Olympics, digital yuan was also made accessible to foreign visitors.
- Global authorities, including the International Monetary Fund, continue to provide reminders that countries adopting CBDCs must remain vigilant to various risks, including monetary policy implementation, bank funding, cyber security, operational resilience and financial integrity and stability, through regular risk assessment and contingency planning.
Technology decisions are made
- Central Banks need to align CBDC technology across G7/G20 for purposes of future interoperability.
- Key decisions must be made on the technology used, including a ledger, distributed ledger and the option to incorporate a blockchain.
- All CBDCs are traceable, but the relationship with identity (governmental, corporate and individual) needs to be determined.
- Further considerations include the role of a CBDC vs. historical settlement system (for instance, Target 2 bridges in Europe) and the ability for the CBDC technology to reference and capture ESG credentials.
Focus on Singapore
1
Global ranking
3rd
Wholesale index
No change from 2021
2
Index value
76
Wholesale index
Up 1 point from 2021
3
Region - Asia
3rd
Down from 2nd in 2021
Index status – Top 10: Wholesale CBDC projects
Highlights
- The Monetary Authority of Singapore (MAS) has been exploring and participating in multiple wholesale CBDC projects for over five years. In 2021, it expanded into two new CBDC (mCBDC) projects, project Dunbar and the ‘Liquidity Management in a Multi-Currency Corridor Network’ project.
- During Project Dunbar the MAS collaborated with the Reserve Bank of Australia, Central Bank of Malaysia, South African Reserve Bank and the BIS Innovation Hub to design and develop a platform facilitating settlements of multiple CBDCs. The project developed prototypes demonstrating how commercial banks can transact directly with each other, using wholesale CBDCs of their respective countries and eliminating the need for intermediaries and reduce the time and cost of cross-border transactions. The final report, released in March 2022, highlighted key design principles enabling trust issues to be addressed through governance mechanisms enforced by technological means. It also shared open questions and challenges across policy, business and technology for future projects to address.
- During ‘Liquidity Management in a Multi-Currency Corridor Network’ Project the MAS and Banque de France collaborated to explore the possibility of facilitating cross-border, cross-currency CBDCs transactions. The mCBDC prototype contained an automated liquidity pool and market-making service for EUR/SGD currency pairs. It utilised smart contracts to manage the euro/singapore dollar currency exchange rate and ensured it was in line with live market transactions. The experiment demonstrated potential for cost efficiencies, with the ability to support multiple central and commercial banks located in various jurisdictions via a single touch point in an integrated platform.
- During Project Dunbar the MAS collaborated with the Reserve Bank of Australia, Central Bank of Malaysia, South African Reserve Bank and the BIS Innovation Hub to design and develop a platform facilitating settlements of multiple CBDCs. The project developed prototypes demonstrating how commercial banks can transact directly with each other, using wholesale CBDCs of their respective countries and eliminating the need for intermediaries and reduce the time and cost of cross-border transactions. The final report, released in March 2022, highlighted key design principles enabling trust issues to be addressed through governance mechanisms enforced by technological means. It also shared open questions and challenges across policy, business and technology for future projects to address.
- While the MAS continues the development of a wholesale CBDC for cross-currency payments, it has for the time being ruled out the need for a retail CBDC, digital Sing dollar.
“It is highly encouraging that Singapore is recognised as a leading innovator in the digital banking space, being ranked top 3 in this global index. Having a common platform will mean significant cost and time savings for cross border transactions, while ensuring the trust and governance all parties require. The success of these two wholesale CBDC projects is testament of what can be achieved by the coming together of a community of solvers - and I believe we can expect more groundbreaking innovation in this space.”
How PwC can help
Understanding
360 degree view of CBDCs, stablecoins and other digital assets.
Knowing when to move
Regulatory and competitive environment.
Financial products and services now and in the future
Including trade finance, treasury liquidity, debt, equity, asset management etc.
Positioning for potential
What’s in it for financial services?
The impact of CBDCs and digital assets
In a retail and commercial context.
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