Central Banks Shift Focus to Wholesale Central Bank Digital Currencies in 2025

Mastercard’s head of crypto & blockchain, Raj Dhamodharan, predicts that central banks will shift their focus away from retail Central Bank Digital Currencies (CBDCs) and prioritize wholesale digital currencies for financial institutions in 2025.

Rethinking the Approach to CBDCs

Central banks are reassessing their strategy for state-backed digital currencies. Initially, many considered issuing their own digital currencies to stay competitive with the private sector. However, the focus is now changing. In a recent blog post, Dhamodharan noted that central banks have concluded that the private sector is innovating adequately, making retail CBDCs a lower priority.

Today, more and more central banks have concluded that the private sector is innovating well on its own and that central bank digital currencies aimed at the general public needn’t be a high priority.

Wholesale CBDCs: The New Focus

Dhamodharan expects central banks to focus on wholesale CBDCs, designed for use by financial institutions, not the general public. These digital currencies aim to enhance settlement capabilities and speed up cross-border capital flows.

These CBDCs could fundamentally increase institutional settlement capabilities and enable the faster movement of capital across jurisdictions.

Tips for understanding the shift to wholesale CBDCs:

  • Wholesale CBDCs are designed for use by financial institutions, not the general public.
  • They aim to enhance settlement capabilities and speed up cross-border capital flows.
  • Central banks are shifting focus away from retail CBDCs due to the private sector’s innovation.

Survey Results Support the Trend

A survey by the Bank for International Settlements in June 2024 revealed that a vast majority of central banks worldwide are steering away from issuing retail versions of CBDCs in the medium term, with only 12% of respondents expressing plans to do so. The survey also indicated that the likelihood of a wholesale CBDC being issued within the next six years is now “greater than that for retail,” with the possibility of nine wholesale CBDCs “publicly circulating towards the end of this decade.”

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