The news: Central bank digital currencies (CBDCs) may offer users “few compelling benefits” they don’t already get elsewhere—limiting adoption and turning them into an “expensive failure,” according to the Center for European Reform (CER).
The global picture: More than 100 countries have considered launching CBDCs, including the UK, US, and EU. But only a handful of countries—among them Nigeria, the Bahamas, and some eastern Caribbean nations—have successfully launched a digital currency.
Part of CBDCs’ appeal is that they are more stable than traditional cryptocurrencies like Bitcoin because they’re backed by a central government. Having a more regulated and centralized framework will, in theory, protect consumers. And developing countries may be able to bring more underbanked citizens into the financial system.
Will CBDCs take off? Despite broad expressed interest from central banks, the small number that have launched a CBDC successfully shows how hard implementing one is—and that most banks still have misgivings.
But it’s not just that central banks haven’t fully embraced them. The Bahamian Sand Dollar accounts for less than 0.1% of currency in circulation on the island, according to the International Monetary Fund, and is being held back by “limited avenues” for use.
The big takeaway: Countries around the world will continue exploring CBDCs, but common problems may hinder widespread uptake. Central banks will have to iron these issues out if they want to make sure consumers embrace them as a valid alternative to existing currencies.