A new survey by the Official Monetary and Financial Institutions Forum (OMFIF) reveals declining enthusiasm among central banks for central bank digital currencies (CBDCs). Despite years of research, central bankers are gravitating toward legacy instant payment systems like the US FedNow for improving cross-border transactions.

The survey found that 47% of central banks prefer interlinking instant payment systems, maintaining last year’s trend. In stark contrast, support for CBDCs dropped sharply from 31% in 2023 to just 13% in 2024. Stablecoins received no votes for the second consecutive year.

The decline in CBDC interest may be tied to geopolitical tensions. The Bank for International Settlements (BIS) recently withdrew from Project mBridge, a CBDC initiative involving China and other non-Western nations, citing concerns over international sanctions. However, the BIS denied any political motivations. The report highlights that the US dollar remains dominant, with 89% of central banks maintaining or increasing their reliance on the currency.

While legacy systems dominate, tokenization is gaining traction. Over 40% of central banks in developed markets see tokenization as a promising solution, particularly for streamlining compliance checks. Projects like BIS’s Project Agora, which focuses on wholesale CBDCs, show potential in this area but remain years away from full implementation.

Cross-border payments, however, are unlikely to shift to blockchain anytime soon. Instead, initiatives like Project Nexus, leveraging the ISO 20022 standard, aim to create unified platforms for instant payments, keeping traditional systems at the forefront.

Central banks’ preference for tried-and-true payment systems reflects their cautious approach, balancing innovation with stability in a rapidly evolving financial landscape.