Central Bank Digital Currency (CBDC)

Government interest in central bank digital currencies (CBDCs) remains strong, with volatility in global cryptocurrency markets in mid-2022 strengthening the case for greater regulation and state involvement in the digital-currency sector. More central banks are moving towards active CBDC pilot projects according to Fitch.

The greatest proportion are focused on retail CBDCs, targeted at the mass market. Four have already moved beyond pilot projects to actual launches. Still, Fitch Ratings expects wholesale CBDC initiatives will eventually prove to be less politically controversial and less technologically difficult to implement than retail CBDCs. Cheaper, Faster, More Transparent.


The use case for CBDCs has been helped by the apparent success of several pilot projects testing cross-border payment and settlement. Improving the efficiency of international payments has long been a priority for international regulators. By bringing multiple currencies and assets into a single system with participants transacting directly, cross-border CBDC pilot initiatives seek to lower costs, speed up settlement and improve transparency. In four key small-scale trials, those goals were achieved, according to the Bank for International Settlements (BIS). Nonetheless, it is still not clear that CBDCs will be the most effective tool to improve cross-border settlement. Incremental improvements to existing systems, for example, may be able to offer less-disruptive paths for progress.

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