Central-bank digital currencies are talked about more than coming to fruition

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digital currency (CBDC). Cardholders did not have accounts with the bank. Instead their monetary value was tracked by chips physically inserted into them.

As with cash, that meant that users were anonymous. Avant ran for three years before being privatised and later discontinued. It saw little uptake compared with other payment channels, such as credit cards with reward points.

And it failed to make money. It took another 30 years for the idea of central-bank digital money to be seriously revived. As recently as 2016, almost no central banks were seriously looking at CBDCs.

Now most are. Declining cash usage, the rise of cryptocurrencies and Facebook’s possible launch of a digital currency called Libra all pushed central banks to look for ways to avoid losing control of their financial systems. Fully 114 countries, representing over 95% of world GDP, have now launched or are exploring CBDCs, up from only 35 in mid-2020, reckons the Atlantic Council.

At least ten have fully launched, with China being the largest to run a pilot. Despite the hype, a small but growing group of politicians and central bankers are questioning the purpose of CBDCs. In January 2022 a report by Britain’s House of Lords concluded that “We have yet to hear a convincing case for why the UK needs a retail CBDC." In March Sweden’s Riksbank released a 900-page report concluding that the case for an e-krona (in a place with a high degree of cashlessness) was not strong.

It has been joined by others that see little advantage in pursuing a CBDC, given the advanced nature of their banking and payment systems. Yet it would be wrong to write off CBDCs. Central banks are the ultimate settlement institution of any financial system.