“The likelihood that central banks will issue a wholesale central bank digital currency (wCBDC) by 2030 now exceeds the likelihood that they will issue a retail CBDC (rCBDC)”, observes a survey by the Bank for International Settlements (BIS) published in June this year. This is despite the fact that projects for rCBDC are currently ahead of those for wCBDCs when it comes to actual deployments and pilots. A report by Flow, Deutsche Bank’s in-house publication, gathers the results from several recent studies on CBDCs to give a general overview of the present landscape.

According to Deutsche Bank research analysts Marion Laboure and Sai Ravindran in their report titled “Central bank digital currencies and cash: A long, quiet river”, the head start rCBDCs seem to be enjoying over wCBDCs might be attributed to emerging markets, where younger demographics and large unbanked populations are driving uptake.

However, most rCBDCs are “not meant to be used for business payments but rather for peer-to-peer transactions and consumer-to-business (C2B) transactions”. Their impact on corporates is thus “limited”.

The choice of bigger players

At institutional level, and for interbank transactions, wCBDCs are the more practical choice. Thus, central banks, especially those in advanced economies, “are now increasingly focusing on wholesale applications”. BIS has estimated that nine live wCBDCs will be established by 2030. Some wCBDC projects include Cedar x Ubin+, a joint research by the Federal Reserve Bank of New York and the Monetary Authority of Singapore (MAS); Swiss National Bank’s (SNB) Project Helvetia III; and the Eurosystem’s wCBDC trials.

A part of the appeal of wCBDCs to institutions has to do with its potential benefits. These include “faster settlement speed, enhanced efficiency and security for interbank transactions such as securities settlement and cross-country and cross-currency payments, as well as more efficiency and therefore reduced costs”, writes Laboure.

Consumers not convinced

Despite the advantages of CBDCs, many remain skeptical about them. A survey conducted in March this year by Deutsche Bank Research Data Innovation Group (dbDIG) shows that while consumers would prefer to use CBDCs over private cryptocurrencies such as bitcoin or ethereum, it is considered a poor alternative. 57 per cent of respondents would rather use debit or credit cards, while 44 per cent would prefer cash over CBDCs. Laboure and Ravindran reflect that consumers “are not willing to sacrifice privacy to improve the utility of a cryptocurrency or a CBDC”.

Although CBDCs are only in the very early stages of development, Flow’s report concludes that nevertheless, the above-mentioned projects “show the high hopes associated with wholesale CBDCs and tokenisation”.