The world of central banking is witnessing a remarkable surge in the exploration of digital currencies, as revealed by a recent survey conducted by the Bank for International Settlements (BIS). This comprehensive study highlights a substantial increase in experiments and pilots related to Central Bank Digital Currencies (CBDCs), primarily among advanced economies, but also involving emerging market and developing economies.

The survey, which garnered responses from 83 institutions, representing over a third of the 222 central banks worldwide, indicates a significant escalation in CBDC-related activities. Proof of concept projects among advanced economy central banks experienced a 35% increase from 2022 to 2023, while CBDC pilots nearly tripled during the same period. This trend is particularly notable, as it signals a growing interest in digital currencies among central banks.

The BIS survey suggests that central banks are adopting diverse approaches to CBDCs, with each progressing at its own pace. A significant 54% of surveyed central banks are experimenting with proofs of concept or the technology underlying CBDC issuances. Furthermore, approximately a third of the surveyed institutions reported running CBDC pilots. This exploration is not limited to advanced economies, as emerging market and developing economies are also actively engaging in wholesale CBDC experiments and pilots.

Among the surveyed advanced economy central banks, 81% were involved in wholesale CBDC-related proof of concept experiments, while 33% were conducting pilots. In contrast, fewer emerging economy-based central banks were working on wholesale CBDCs, with roughly a third engaged in proof of concept experiments and 19% working on pilots. These experimentation rates remained largely unchanged from the previous year.

Despite the accelerating rate of CBDC exploration among central banks, stablecoin adoption remains limited. As of May 2024, the market capitalization of cryptocurrencies stood at $2.7 trillion, with stablecoins comprising a mere 6% of the crypto market cap, valued at $161 billion. This disparity highlights the ongoing cautious approach of central banks in embracing digital currencies, despite their growing interest in exploring the potential of CBDCs. As the financial landscape continues to evolve, it will be fascinating to observe how central banks navigate the complexities of digital currencies and their potential impact on the global economy.