In a significant shift in the evolution of digital payments, most banks and financial institutions are shifting their focus, now preferring to distance themselves from central bank digital currencies (CBDCs).
Although two years ago at least 52% of financial institutions had expressed their preference for CBDCs as their preferred mechanism to digitize their operationscurrently only 15% continue to consider this option. This is indicated by the latest technical report published by Citigroup, which includes a survey of nearly 500 institutions.
“65% of respondents plan to use non-CBDC options, such as stablecoins, tokenized deposits, money market funds, and digital payment systems, to support cash and liquidity requirements for digital securities settlements by 2026, compared to 15% who plan to use CBDCs. This is a stark contrast to the previous year, when CBDCs were the preferred form of digital money at 52%.”
Citigroup Securities Services White Paper.
Research suggests that while the transparency and on-balance sheet assets offered by CBDCs make them attractive, challenges in their development and the urgent need for practical solutions have led to a change of course.
As itBitcoin/” target=”_blank” rel=”noreferrer noopener”> CryptoNews reported last year, More than 100 CBDC projects sought to compete with bitcoin. This although the general public show preferences for the currency invented by Satoshi Nakamoto.
Additionally, banks face technical hurdles in developing CBDCs, while also managing concerns about how they may affect financial equilibrium, the report suggests.
Among the unanswered questions banks still have is how they can continue to meet their currency oversight responsibilities when their foreign exchange settlement is done through third-party platforms. Similarly, they wonder: what will happen to bank balances when pension funds and asset owners are able to hold their cash investments in CBDCs? How will that affect bank liquidity?
There is still progress, however, as Europe is one of the regions that has seen the greatest progress in these terms. In fact, the issuance of the digital euro is planned for sometime in 2025.
The region is moving forward on the development of its CBDC, despite the fact that only 5% of Spanish businesses believe that the digital euro will be good for their business, precisely because Spaniards are showing determined not to use that asset.
Most institutions surveyed for Citibank’s study do not plan to use CBDCs to digitize their operations. Source: Citibank Report.
Stablecoins, the new favourites of banks
As the list of questions banks are asking about the development of CBDCs grows, so does the practical need for progress in digitizing the processes of a system that has become somewhat obsolete after the emergence of the Blockchain network. Bitcoin more than 15 years ago.
For this reason, financial institutions now are putting greater focus on other alternatives, including stablecoins non-banking and asset tokenization, as noted in the Citi report.
It was something that had already been warned, since a survey by the Bank for International Settlements (BIS) showed that banks now seek to replicate the success that stablecoins have. This included 86 central banks around the world28 of them located in the most developed countries.
According to the results of the study – published on June 14 – Plans to launch a CBDC include the 94% of central banksmany of whom have changed their focus and whose primary motivation is to counter public interest in stablecoins and cryptocurrencies like bitcoin.
“More than half of central banks responding to the survey (63%) said they had accelerated their work on CBDCs in response to developments in stablecoins and other cryptoassets,” the BIS report said.
Latin America, the key to change
The Citi report also highlights what is happening in Latin America in terms of digital financial infrastructure, thus promising a radical change in the markets in the coming years.
The region is moving forward with determination if one takes into account that only 8% of financial institutions in the region express concerns on digital payments, the lowest percentage globally, the report adds.
However, challenges revolve around navigating the complexity of multiple regulators and currencies in the region. Beyond that, the potential for growth and collaboration is undeniable, Citibank analysts note, who They see Latin America as a true cradle of change in the global financial scenario.
The tokenization of bonds and investment funds, as well as 24/7 real-time payments are among the most significant changes taking place in the region. Source: Citibank Report.
As part of this, one of the most anticipated developments is the creation of a unified regional market, marked by the formal incorporation of the holding nuam, a project that is already underway in Chile, Colombia and Peruis expected to be launched in 2025, hinting at a more integrated and collaborative future in the region.
The proposal is to launch a regional index composed of the markets of Chile, Colombia and PeruThis collaboration marks a new milestone for the integration of the Lima, Santiago and Colombia stock exchanges.
The new index can be used as a basis for financial products such as ETFs and, as the group itself has indicated, aims to offer investors an innovative and high-quality tool to help navigate the dynamics of the market.
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