The Bank for International Settlements (BIS), a global organization of central banks, is expanding its efforts to study and experiment with the emerging world of central bank digital currencies (CBDCs) and stablecoins. In 2023, the BIS Innovation Hub will increase its focus on CBDCs, as part of its goal to improve payment systems and bring stability and security to the financial system.
To further this goal, the BIS will launch a new experiment called “Project Pyxtrial,” aimed at monitoring the balance sheets of stablecoins. Many central banks currently lack the necessary tools to systematically monitor stablecoins and avoid mismatches between assets and liabilities. The BIS aims to fill this gap by developing a platform to monitor stablecoin activities and provide guidance to central banks on the design and implementation of CBDCs.
The BIS will concentrate its efforts on retail CBDCs, such as the two-tiered system known as Aurum, which was piloted in Hong Kong. Retail CBDCs, as opposed to wholesale CBDCs, are aimed at serving the needs of the general public and offer new opportunities for financial inclusion. In its CBDC-related projects, the BIS will also explore the distribution of a retail CBDC through an open API ecosystem in a joint experiment with the Bank of England (BOE) known as Rosalind.
In the past couple of years, the BIS has been actively involved in CBDC-related projects and experiments. Of the 26 projects that have been active, 15 have been focused on CBDCs and payment systems improvements. The increasing awareness and interest from central banks has been cited as the primary driver of this growth.
In September 2022, the BIS concluded a pilot for a platform called mBridge, which was designed to connect different CBDCs and allow for cross-border payments. The pilot was conducted in partnership with central banks from Hong Kong, Thailand, China, and the United Arab Emirates, as well as 20 commercial banks from the participating countries.
The adoption of CBDCs is still in its early stages, with only 11 countries having fully launched a CBDC, mostly in the Caribbean region with the exception of Nigeria. However, there are 17 nations undergoing pilots, mostly in Asia, including China, Russia, Kazakhstan, India, South Korea, Thailand, and Malaysia.