Central banks are progressing in their research on retail central bank digital currencies, but some have yet to commit to launching one. As more research and experimentation is undertaken, 2025 could see some concrete decisions made on issuance.
OMFIF, in partnership with Giesecke+Devrient, is publishing a report in February exploring the factors contributing to the hesitation about launching a CBDC and what concerns central banks struggle with. In the report’s survey of central banks, 81% of respondents have issued or expect to issue a CBDC at some point, with 47% expecting to issue one within five years (Figure 1).
Figure 1. Timeline of CBDC issuance
When do you expect to issue a CBDC? Share of respondents, %
Source: OMFIF 2024 survey of central banks
The European Central Bank is entering the second year of the digital euro’s preparation phase. The ECB aims for the digital euro to ‘bring cash into the digital age’, while retaining the key features of the physical currency: a pan-European reach, no cost to users, privacy and offline usability as features and ECB issuance. By October 2025, the ECB will expect to finalise the scheme rulebook, select service providers and have explored technical features for further testing.
The Bank of England is still investigating the technological and policy requirements for the digital pound. It remains undecided on issuing a digital currency but a decision could come as early as this year.
Privacy is a major concern for both central banks, featuring heavily in the responses to the Bank of England’s public consultation.
Holding limits, the maximum amount of digital currency that users could hold in an account, is another concern that central banks would need to address. Different ecosystem members may disagree on the limit amount. For instance, commercial banks may prefer lower limits as using the CBDC as a store of value may impact their deposits, while consumer groups might prefer higher limits for usability and convenience.
For the ECB, part of the work of the preparation phase will involve setting the holding limit, based on their methodology of a dedicated workstream, data collection exercises and reflections on the impact on economic conditions.
Many emerging market central banks have also made progress towards CBDC issuance by publishing design papers, proof-of-concepts or undertaking pilot projects. Banco Central do Brasil hopes to launch its blockchain-based digital currency, DREX, in 2025 for general use. So far, three successful transactions have been carried out as part of the pilot project.
The Bank of Ghana has completed its eCedi pilot testing within a sandbox environment but is awaiting the government’s decision on launching. The eCedi report considers the pilot to be a success and highlights the central bank’s focus on becoming institutionally ready to launch the eCedi, but economic stabilisation takes priority for now.
Increased demand for wholesale CBDC
The Bank for International Settlements observed in its 2024 paper an uptick in the share of central banks running experiments for wholesale CBDCs. In November 2024, the Eurosystem completed exploratory work focusing on interoperability between distributed ledger technology systems and existing central bank infrastructure. These included the Deutsche Bundesbank’s Trigger Solution, Banca d’Italia’s TIPS Hash-Link solution and the Full-DLT Interoperability solution from Banque de France.
There are 35 different exchanges operating across the European Union, which is causing fragmentation. As such, central banks are seeing a clear demand from the market to deliver short-term solutions for this issue. The Eurosystem is aware of the pressure to continue with trials to utilise DLT to address fragmentation and will strive to balance short-term needs with long-term adaptability.
In Asia Pacific, central banks from the Philippines and Indonesia have completed proof-of-concepts for wholesale CBDCs, named Project Agila and Project Garuda respectively. Meanwhile, the Hong Kong Monetary Authority continues to pave the way in this area with projects such as Ensemble, launched in 2024, aiming to research tokenisation use cases.
Cross-border payments
More recently, HKMA expanded its work on cross-border payments by announcing in October 2024 it will conduct experiments to connect Project Ensemble with Brazil’s DREX pilot. Despite the growing importance of instant payment systems – OMFIF’s 2024 Future of payments report found that 47% of survey respondents chose interlinking IPS as the most promising avenue for improving cross-border payments over the 13% that selected connecting CBDCs – central banks have clearly not ruled out wholesale CBDCs and their role in cross-border payments (Figure 2).
Figure 2. Connecting CBDCs a distant second choice
What do you think is the most promising avenue to improve cross-border payments? Share of respondents, %
Source: OMFIF Future of payments survey 2024
HKMA is also involved with Project mBridge, alongside the central banks of Thailand, the UAE, China and Saudi Arabia, to improve efficiency, speed and transparency in cross-border payments by using a multi-currency CBDC platform.
Katerina Liu is a Research Analyst, Digital Monetary Institute, OMFIF.
Register to attend the virtual launch of the OMFIF-G+D report on 11 February.
