Central banks favor legacy systems as enthusiasm for CBDCs fades

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Mirjan Hipolito

29.11.2024

Central banks favor legacy systems as enthusiasm for CBDCs fades

Central banks worldwide are increasingly favoring legacy instant payment systems over central bank digital currencies (CBDCs) for improving cross-border payments, according to the 2024 Future of Payments survey by the Official Monetary and Financial Institutions Forum (OMFIF). The survey reveals a decline in enthusiasm for CBDCs, with only 13% of central banks identifying them as a preferred solution, down from 31% in 2023.

Instead, nearly half (47%) of respondents chose interlinked instant payment systems, such as the U.S. FedNow, as their top choice for enhancing cross-border transactions. Stablecoins, meanwhile, received no votes, mirroring last year’s findings. The U.S. dollar remains the dominant settlement currency, with only 11% of central banks reducing their reliance on it, signaling its continued importance amidst geopolitical tensions.

Tokenization and legacy systems lead the way

While traditional correspondent banking faces challenges due to rising compliance costs, central banks are exploring tokenization to streamline processes. Over 40% of central banks in developed markets view tokenization as a promising avenue, with plans to implement it within the next three to five years. Initiatives like the BIS’s Project Agora, which relies on wholesale CBDCs, and Project Nexus, focused on instant payment systems, highlight the range of approaches being considered to modernize financial infrastructure.

Despite advancements in blockchain and tokenization, the preference for instant payment systems underscores the enduring role of traditional financial networks. The ISO 20022 messaging standard is expected to play a pivotal role in shaping the future of global payments, whether through blockchain integration or enhancements to legacy systems.

The waning interest in CBDCs and the strong preference for instant payment networks suggest that central banks are prioritizing pragmatic, low-risk solutions for cross-border transactions. As tokenization gains traction and new technologies emerge, the balance between innovation and reliability will shape the next era of global financial systems.

Central banks favor legacy systems as enthusiasm for CBDCs fades

Tokenization and legacy systems lead the way

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