The value of CBDC transactions “could reach $213 billion” by 2030

The value of payments made using central bank digital currencies (CBDCs) will skyrocket to US$213 billion a year by 2030 – up from just US$100 million this year – according to a new study from Juniper Research.

If realized, this level of increase in CBDC activity would represent a growth of more than 260,000%. Juniper Research says the forecast reflects the nascent phase of the sector, which is currently limited to pilot projects, but also the huge opportunity for CBDCs to become a mainstream way to pay for goods and services.

CBDCs are digital pounds or dollars, issued by central banks and linked to the country’s fiat currency. They come with some inherent rules on how they can be used – for example, they may have an expiry date or be limited to certain services or goods. In that respect, they are more like coupons than physical cash and can be used to stimulate economic growth. However, because CBDCs have the backing of a central bank, they are seen as more reliable than mainstream DeFi like bitcoin and ethereum.

According to the Bank for International Settlements, 60% of central banks are currently experimenting with CBDCs, so we may see them launch in the near future – but they do raise some security concerns. For example, because it is a digital currency with all transactions recorded in a ledger, anyone who has access to that ledger has access to your transactions. It raises the possibility that CBDCs could be used by unscrupulous authorities for surveillance purposes.

Despite potential, CBDCs will initially be domestic

Juniper Research has found that by 2030, 92% of the total value transacted via CBDCs will be paid domestically. Since CBDCs are issued by central banks, they will initially be tightly targeted at domestic payment challenges, with cross-border payments coming later, as systems are established and links are established between CBDCs used by individual countries.

Nick Maynard, who wrote the report for Juniper Research, explains: “While cross-border payments currently have high costs and slow transaction speeds, this area is not the focus of CBDC development. As CBDC adoption will be very country-specific, it will be up to cross-border payment networks to connect schemes so that the wider payments industry can benefit from CBDC.

The research identified the lack of commercial product development around CBDC as a key limiting factor for the current market, with few well-defined platforms for central banks to exploit. Juniper advises potential CBDC platform providers to develop a complete end-to-end solution – including wholesale capabilities, wallet provisioning and merchant acceptance – to enable the realization of CBDC’s potential.

Writing this week in InsurTech Digital, Risto Rossar, founder and CEO of low-code provider Insly, explained what central banks’ digital currencies will mean for insurance and finance in general. A CBDC future could lead to faster and more efficient banking, Rossar said.