For many people, the phrase ‘digital currency’ will make you think of Bitcoin or currencies fromwithin a video game universe. But, as the world moves away from cash at an ever-faster rate,central banks are having to consider whether they need to start developing digital versions ofthe notes and coins that we have in our wallets. These fit under a broad umbrella – central bankdigital currencies (CBDCs).

Why are central banks getting more involved now?

The world’s largest central banks have woken up to the idea in recent months, having beenrelatively cautious on the subject of CBDCs until now.The leaders, globally, are still Sweden (see page 15 for more detail) and mainland China (page17), and both could well launch digital currencies before the end of 2021. Their progress, aswell as the continuing decline in cash usage, accelerated by COVID-19, is spurring other centralbanks to look much more closely at the issue. In recent weeks there have been key reports fromboth the ECB1 and the BoJ2 following closely behind a joint report3 from seven major centralbanks and the BIS that outlines the foundational principles and core features of CBDCs.Both the ECB and BoJ appear to be turning more positive on the subject, and the presence of FedChair Jerome Powell on a panel on the subject of digital currencies at the recent IMF meetings is also telling. The world’s major central banks are clearly taking more interest in the subject and we summarise their latest thoughts on page 12.