Many central banks are fine with tourists using their hypothetical digital currencies, the Bank of International Settlements (BIS) said Thursday.
The BIS published a survey examining the possible cross-border use of central bank digital currencies (CBDC) based on 50 central banks. While BIS did not disclose which banks replied to the survey, it says that 18 were in advanced economies and 32 in emerging-market and developing economies (EMDE). About two-thirds of them are already experimenting with CBDC and conducting pilots, the BIS said.
“A number of central banks are open to allowing tourists and other non-residents to use CBDCs within their own jurisdiction,” BIS wrote, reiterating that “a CBDC could function as a means of payment for tourists to a currency zone or even entire countries outside it.”
While many banks are still concerned about volatility in exchange rates, especially “if flows between domestic currency and a foreign CBDC were to be disorderly,” 28% told the BIS they would be interested in forming multi-CBDC (mCBDC) arrangements to build a single payment system.
“Central banks are considering a variety of mCBDC arrangements. Some central banks are even contemplating multiple CBDCs run on a single system,” BIS wrote.
One of the biggest concerns among banks, particularly those in EMDEs, are economic and monetary implications. For example, “digital dollarization,” which refers to the risk of a foreign CBDC replacing the domestic currency in payments and financial transactions. Countries in EMDEs include India, Brazil, China and Mexico, among others.
Central banks are starting to look toward issuing their own digital currencies as a way of modernizing their existing financial systems or using new technology to better implement monetary policies. El Salvador, which doesn’t use its own native currency as its primary legal tender, recently passed a law recognizing bitcoin as legal tender, becoming the first country to do so.