The rise of digital technologies has triggered a paradigm shift in the financial landscape, with central bank digital currencies (CBDCs) emerging as a crucial topic of discussion among policymakers and financial professionals globally.

As the opportunities and challenges of incorporating digital versions of fiat currency are being considered globally, the CFA Institute conducted an in-depth survey from February 13 to 27, 2023.

This initiative examined global sentiments, particularly in the dynamically evolving Asia-Pacific (APAC) region and distinguished itself by focusing on the demand side of CBDCs.

With 4,157 valid responses from professionals in diverse fields, the survey unearthed complex insights, revealing a landscape marked by limited understanding, divided support, and diverse perceptions across various regions and demographics.

Survey results match regional developments in APAC

The APAC region’s favourable view towards CBDCs aligns well with its ongoing enthusiasm for digital finance and innovation. Countries such as China, India, and Thailand have significantly progressed in CBDC experimentation and implementation.

China’s pilot digital currency, e-CNY, underwent experimentation in 2019 and expanded to 23 cities and areas by 2022. Similarly, India made significant progress with its eRupee initiative, which underwent pilot testing starting in December 2022.

APAC’s heightened interest in CBDCs resulted from its digital leadership and forward-thinking approach. A significant driving force behind this interest was the pursuit of financial inclusion and stability, motivating the region to explore the potential of CBDCs.

The survey data revealed strong support for CBDCs in emerging markets, particularly in APAC. India and China, in particular, demonstrated exceptionally high support, with 66 percent and 70 percent of respondents favouring the launch of CBDCs.

Key findings reveal mixed results

The survey findings showed a mixed sentiment towards CBDCs among global participants. While 42 percent believed that central banks should launch CBDCs, 34 percent disagreed, and 24 percent expressed no preference.

Notably, the survey revealed a limited understanding of CBDCs, with only 13 percent of respondents claiming to have a firm grasp of the concept. This indicated a significant lack of awareness and knowledge among investment professionals.

The survey also highlighted a generational gap in CBDC awareness, with younger participants showing a greater affinity towards CBDCs. Among those under 30, 51 percent reported a low level of understanding compared to 39 percent among those over 55.

This difference in perception suggests that the younger, tech-savvy population is more open to CBDCs, reflecting the region’s progressive digital culture.

APAC supports CBDCs for financial inclusion

CBDCs have garnered more substantial support in developing markets for their potential to improve financial inclusion than developed economies. While only 37 percent of respondents in developed markets preferred CBDCs, 61 percent in emerging markets favoured their adoption.

 

This preference is driven by the belief that CBDCs can help overcome common barriers to financial inclusion and reduce transaction costs, particularly benefiting lower-income households. In the Asia-Pacific region (APAC), 54 percent of participants strongly believed that CBDCs would enhance financial inclusion.

Interestingly, respondents globally believed that CBDCs should pay interest, and this preference correlated with economic development. Participants in emerging markets showed a higher inclination towards this choice than those in developed economies.

 

Providing interest in CBDCs could incentivise individuals to embrace these digital currencies as an alternative to traditional savings methods, thereby fostering increased financial inclusion.

On the other hand, only 33 percent of respondents in the European Union and 25 percent in North America believed that CBDCs would likely improve financial inclusion. Additionally, younger participants were more likely to agree with this proposition, with 42 percent of those under 30 expressing confidence in CBDCs’ potential to enhance financial inclusion.

Concerns and benefits

The findings of the CFA Institute’s survey resonated with studies conducted by other international financial bodies, such as the International Monetary Fund and the Bank for International Settlements.

The global momentum towards CBDCs is clear, with 19 G20 countries in an advanced stage of CBDC development. The promise of a more inclusive and efficient financial system is compelling, but it is not without its challenge.

While participants strongly supported CBDCs, they also raised several concerns about their implementation. The primary concerns included cybersecurity and fraud, data privacy, and the lack of practical use cases for CBDCs. These concerns highlighted the need for robust security measures and addressing privacy issues during the development of CBDCs.

Despite these concerns, the critical drivers for CBDC adoption remained the acceleration of payments and transfers. Respondents from asset management, investment firms, brokerage firms, commercial banks, IT firms, and insurance providers expressed a favourable view of CBDCs, believing they could enhance financial inclusion and improve services.

The survey’s data also indicated that most respondents (56 percent) globally opposed central banks providing direct credit to individuals and businesses through CBDCs.

This opposition was more pronounced in developed economies, where 59 percent were against the idea, compared to 43 percent in emerging markets. However, countries like China and India expressed a favourable view of this proposition, with 58 percent of respondents in both countries in support.

The survey also highlighted contrasting views on the relationship between CBDCs and private cryptocurrencies. A majority of respondents believed that CBDCs could coexist with private cryptocurrencies. However, most of them still viewed government-issued money as superior, reflecting a deep-rooted trust in public institutions and a recognition of their role in maintaining financial stability.

Design choices

The survey also explored participants’ views on various design choices for CBDCs. Most respondents globally did not believe there should be a quantitative limit to the amount of CBDC people are allowed to own.

However, in emerging markets, respondents in China, North Africa, and India showed higher levels of support for a quantitative limit on CBDC ownership.

Regarding the provision of direct CBDC accounts with individuals, respondents were divided, with 40 percent disagreeing and 36 percent in favour globally.

However, respondents in China, India, and the United Kingdom agreed more with allowing direct CBDC accounts with the central bank. This indicates a potential interest in direct engagement with the central bank, particularly in countries where the government’s economic role is viewed more favourably.

Interestingly, respondents employed at commercial banks strongly believed that banks should serve as intermediaries by administering CBDC accounts on behalf of central banks.

This finding is understandable, as they might perceive direct CBDC accounts as a potential threat to the operations of commercial banks.

Potential implications and recommendations

Significant regional disparities were highlighted in the survey results, with emerging markets, particularly in the Asia-Pacific region, showing a higher receptivity towards CBDCs. This allows policymakers and central banks in these countries to use CBDCs to address financial inclusion challenges.

To overcome the limited understanding and support for CBDCs, central banks must prioritise education and awareness initiatives for the general public and financial professionals. By conducting informative campaigns that elucidate the potential benefits of CBDCs, central banks can build trust and confidence among their target audience.

In addition, policymakers should carefully consider the specific needs and opportunities in developing economies to ensure the successful implementation of CBDCs.

By tailoring CBDC designs to address the specific challenges faced by underserved populations, particularly in regions where financial inclusion is a pressing issue, CBDCs can make a meaningful impact in fostering inclusive economic growth.

APAC: looking forward

Driven by digital advancements and a desire to enhance financial inclusion, the survey results emphasised the APAC region’s strong interest in CBDCs.

The survey underscored the need for each region to tailor its CBDC initiatives to specific needs and demographics. While financial inclusion is a priority in the APAC region, other areas may have different focal points. Understanding these nuances is essential for crafting policies that benefit the broader population.

As nations explore this digital frontier, a cautious and inclusive approach that leverages opportunities while recognising risks will be essential.

The potential of CBDCs to revolutionise the global financial system calls for an engaged and collaborative effort from policymakers, regulators, and stakeholders. By aligning goals, sharing best practices, and innovating responsibly, the world can shape a monetary system that is more efficient, inclusive, and prepared for the future.