## THE ASCENT OF CBDCs

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**Canonical URL:** [THE ASCENT OF CBDCs](https://www.imf.org/-/media/files/publications/fandd/article/2022/september/pt-the-ascent-of-cbdcs.pdf)

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### Definition and overview
- Central bank digital currencies (CBDCs) are digital versions of cash that are issued and regulated by central banks.
- CBDCs are described as more secure and inherently not volatile, unlike crypto assets.
- As of July 2022, there were nearly 100 CBDCs in research or development stages and two fully launched.

### Historical milestones
- 1993: The Bank of Finland launched the Avant smart card, an electronic form of cash, considered the world’s first CBDC.
- Early 2000s: The Avant system was eventually dropped.
- October 2020: The Bahamian sand dollar debuted.
- October 2021: The eNaira in Nigeria was unveiled.

### Global status and counts (stated period)
- As of July 2022:
  - Launched (2)
  - Pilot (15)
  - Proof of concept (15)
  - Research (65)
- Additional timeline snapshots shown:
  - July 2020: Launched (0), Pilot (7), Proof of concept (7), Research (25) — total 39
  - July 2018: Launched (0), Pilot (1), Proof of concept (3), Research (15) — total 19
- Specific program counts highlighted: 15 pilots ongoing across the world and 15 more in an advanced research stage.

### Motivations and potential benefits
- Primary motivations vary by country; for The Bahamas, serving unbanked and under-banked populations across more than 30 inhabited islands was a primary driving force.
- Potential benefits cited:
  - Promote financial inclusion.
  - Improve the efficiency and safety of payment systems.
  - Create greater resilience for domestic payment systems.
  - Foster more competition, which may lead to better access to money, increase efficiency in payments, and lower transaction costs.
  - Improve transparency in money flows.
  - Could help reduce currency substitution.

### Risks and considerations for central banks
- Central banks must determine whether there is a compelling case to adopt CBDCs in their jurisdictions, including whether there will be sufficient demand; some central banks have decided there is not, at least for now.
- Identified risks:
  - Users might withdraw too much money from banks all at once to purchase CBDCs, which could trigger a crisis.
  - Cyberattack risks and the central bank’s capacity to manage them.
  - Ensuring data privacy.
  - Preserving financial integrity.

### Policy implications and deployment considerations
- Central banks are proceeding through various stages of development to assess benefits and risks and to consider deployment approaches.
- Key policy questions include:
  - Is there sufficient domestic demand to justify issuance?
  - How to design CBDCs to avoid destabilizing bank deposits (mitigating run risk)?
  - How to ensure robust cyber resilience and data privacy protections?
  - How to preserve financial integrity while leveraging transparency gains?

*Source: THE ASCENT OF CBDCs (Finance & Development, September 2022).*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2022/september/pt-the-ascent-of-cbdcs.pdf_