An index charting the readiness and adoption of central bank digital currencies (CBDC) has seen Nigeria top the retail CBDC leaderboard with the e-Naira, launched in October 2021. Nigeria’s lead is closely followed by other early CBDC adopters, the Bahamas, Mainland China, Jamaica and Eastern Caribbean.
The findings, from the PwC Global CBDC Index, capture the central banks’ progress and stance on CBDC development, in both a retail and wholesale context. In the UK, the Bank of England and HM Treasury will later in the summer consult with industry to set out the assessment of the case for a potential UK CBDC, including the merits of further work. However, the Economic Affairs Committee of the House of Lords recently declared CBDCs ‘a solution in search of a problem’.
The interest in digital currencies follows the fall in cash payments. In the UK, the Bank of England has reported a dramatic drop in recent years, with only 17% of all payments in 2020 made using bank notes. This was down from over 50% of payments in 2010.
Many Central Banks have also been driven by the rise of private sector cryptoassets, which the Bank of England and Financial Stability Board have recently called a potential systemic risk.
PwC’s analysis also gives an overview of stablecoins, privately issued cryptoassets which aim to maintain a stable value by pegging to a fiat currency or other assets. According to PwC’s Stablecoin Overview, four key characteristics can be used to determine a coin’s future utility. Namely, the level of regulatory oversight and registrations, the strength of evidence confirming the existence of the underlying assets backing the stablecoin, the nature of reserve holdings and underlying technology used.
The PwC Global CBDC Index, now in its second year, is designed to measure a central bank’s level of maturity in deploying their own digital currency. The inclusion of the Stablecoin Overview was considered a sensible evolution in the analysis, given the two frameworks co-exist. One framework is fully state backed whereas the other is only partly, and only to the extent that the underlying deposit taker is regulated and protected by the state through regulation and deposit protection schemes.
Haydn Jones, UK Blockchain & Crypto specialist at PwC UK, said:
“Given the fall in cash use and the rise in cryptocurrencies, our new report gives a timely update on the progress and development of CBDCs.
“This year’s report shows that globally appetite is strong with over 80% of central banks considering a CBDC. Our index shows that Nigeria is leading the way with countries including the Bahamas, China and Jamaica with already live or near live currencies and many more expected to follow in the next few years.
“Here in the UK steps are being taken to look at how we could adopt CBDCs, with the Bank and the Treasury looking carefully at the potential design and development.
“Digital currencies could prove to be a huge boost, opening up vast new markets and creating sources of business that could last for decades. As CBDC adoption looks closer to becoming the new global norm, it’s vital the UK continues to ensure that we remain future focused and alive to change, whatever that may look like.”
Points of Reference:
Data in the PwC Global CDBC Index is sourced from BIS (‘Rise of the central bank digital currencies: drivers, approaches and technologies’, BIS working paper, No 880, August 2020 (updated January 2022) by Auer, R, G Cornelli and J Frost), Central Bank websites, Atlantic Council, Press, Central Banks, Google Trends, Baidu Index and PwC Analysis.
The primary variable is the CBDC project status, indicating the current stage of project development. Two other variables capture the stance of the central bank based on published speeches, and a public interest proxy (Google Trends or Baidu Index). The index is technology agnostic: each countries’ design choices (infrastructure, technologies, etc.) have no impact on the index. We have made extensive use of the BIS data, and subjected the analysis to several rounds of review prior to publication. Furthermore, a quality review is performed on index distribution and ranking changes to evaluate data robustness. An expert judgement is undertaken on scores allocated to each qualitative indicator, i.e. CBDC projects’ advancement status and CB speech stance before each publication.
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