There has been a steady rise in commentary about CBDCs in recent years. They worry that privacy campaigners, such as how they could be part of a China-style "social credit" system of incentives and penalties for behaviours. Advocates say they can unlock new services and flexible business models.

Investment professionals don’t understand central bank digital currencies very well and aren’t keen on the idea, with some raising privacy fears as a reason for their caution, a new survey finds.

The CFA Institute, taking responses from 4,157 people in February this year, brought out the study as the Bank of England discussed a “digital pound,” with 130 countries reportedly exploring a CBDC, up from 35 in 2020. 

Only 46 per cent of respondents to the study in the UK – and 42 per cent globally – think that central banks should launch CBDCs, with respondents citing several concerns about their application. Among UK respondents who opposed launching a CBDC, the top reason cited was a belief that their introduction does not currently address a compelling need (49 per cent). Another reason is that innovations are already improving payment mechanisms without the need for a CBDC (35 per cent taking this view.). Some 33 per cent of respondents said that they have fears over data privacy. Only 15 per cent of UK respondents said they had a strong understanding of CBDCs.

There’s been a steady rise in commentary about CBDCs in recent years driven, to some extent, by digitalising money. Also, some central banks have been banning high-value banknotes to foil – so it is claimed – money launderers and tax cheats. According to a study by PricewaterhouseCoopers in 2021, there were 1,035 billion global cashless payments in 2020. This figure is expected to increase by 82 per cent in 2025 and to almost triple by 2030. Research by the World Bank finds that two-thirds of adults worldwide have made or received a digital payment.

However, the idea of such currencies worries privacy campaigners – a matter certain to exercise the private banking industry, for obvious reasons. Concerns include, for example, that they could form part of a China-style “social credit” system of incentives/penalties for behaviours – such as spending money on a gym membership, or buying large amounts of alcohol, purchasing subversive literature, and the like. CBDCs could also increase the power of states to impose forms of monetary policy – such as the recent decade-plus of ultra-low/negative interest rates. The privacy issue has taken a new turn in the UK following the drama over “de-banking” of political and other figures because of their views.

In other findings, the CFA Institute’s report said although support for the creation of a CBDC in the UK stood at less than half (46 per cent), respondents were even more sceptical in other developed markets, such as in the US (31 per cent) and Canada (38 per cent). Those in emerging markets, such as China (70 per cent) and India (66 per cent), were much more likely to be in favour, possibly a result of the belief that CBDCs would significantly accelerate payments and create a cash-like form of payment.

Comparing these markets underlines the divergence in attitudes across regions – 61 per cent of respondents from emerging markets favour a CBDC versus 37 per cent of those in developed markets.

“The results illustrate a general feeling of scepticism which continues to dominate perceptions, and central banks and governments will need to run a significant education programme with consumers prior and during the launch of a digital currency,” Olivier Fines, CFA, head, EMEA advocacy, CFA Institute, said. “Acceptance by end users will be critical for any CBDC, but this is far from guaranteed even in those markets which are more receptive to digital money, particularly if it fails to live up to its perceived benefits.”

Less than a third (32 per cent) of global respondents believe a CBDC would enhance financial stability and a similar proportion (34 per cent) though one would likely improve financial inclusion of under-served economic sectors or populations.

Elsewhere, 58 per cent of global respondents said private money will always be inferior in quality and security to government money.