Juniper Research noted that as payment technologies evolve, fintech companies, central banks, and commercial banks are increasingly focusing on the ongoing transition to online methods of payment.
Juniper Research added in its update that this trend is evident in the growing preference for using digital wallets, which are are said to be rapidly “becoming a more popular method compared to physical card-based payments.”
Additionally, the researchers at Juniper Research stated that the growing popularity of A2A (Account-to-Account) payments displays the “demand for low-cost, fast transactions.”
Juniper Research also mentioned in its latest update that this has “resulted in the high interest that central banks have in developing CBDCs (Central Bank Digital Currencies), with a survey by BIS (Bank of International Settlements) finding that 96% of central banks are exploring the possibility of a CBDC.”
However, the report from Juniper Research also stated that the digitalization of cash presents unique challenges, raising various critical “questions about its potential success in becoming a mainstream method of payment across the globe.”
Addressing these questions is crucial for “shaping the future landscape of payments.”
As noted in the research report, digital currency, also known as ‘eCash’, refers to any form of currency only available in electronic or digital form. It is “managed, stored, and exchanged on digital systems.”
According to the extensive update shared by the team at Juniper Research, there are three main types of digital currency: cryptocurrency, CBDCs, and stablecoins.
Juniper Research defines stablecoins and CBDCs as follows: ‘A stablecoin is a cryptocurrency that has its value pegged or tied to a fiat currency.’
‘A Central Bank Digital Currency is a digital coin issued by a central bank and pegged to a fiat currency.’
This comprehensive report has carefully examined the role of CBDCs and Stablecoins in “the payments ecosystem and how this could evolve in the future, as well as providing an overview of the current questions surrounding their adoption.” In relation to other payment technologies, CBDCs and Stablecoins “are new entries to the market.”
Cryptocurrencies were the “first digital currencies to gain significant notoriety.”
Early digital currencies, such as eCash in 1990, put into practice the “concept of safely and privately transferring currency tokens between individuals online.”
In 2009, the launch of Bitcoin (BTC) marked the “beginning of decentralized blockchain-based digital currencies.” Stablecoins emerged in the mid 2010s, with the goal of combining the “benefits of digital currencies and the stability of fiat currencies.”
Tether, one of the earliest launched stablecoins that continues to maintain its 1:1 peg to the dollar, was launched in 2014 to address the volatility issues with cryptocurrencies.
As stated in the report, this rose to prominence quickly, surpassing Bitcoin in 2019, to “become the most traded cryptocurrency.”
By the late 2010s and early 2020s, several other stablecoins had also “risen to prominence, such as Circle’s USDC and the algorithmic stablecoin DAI.”
Stablecoins have repeatedly faced, over the years, significant “concerns and experienced crashes, the most recent being Terra in 2022,” the report noted.
Tether has also faced questions about whether it holds “sufficient fiat reserves, as a fraud investigation in New York concluded that its coins are not fully backed by US dollars.”
These concerns remain present in the public consciousness, “contextualzing the current market position of stablecoins.”
The concept of CBDCs has its roots in the rise of digital payments and cryptocurrencies, gaining momentum in the late 2010s as banks “sought to modernize their monetary systems. China, an early adopter, began researching the topic of issuing a CBDC in 2014, driven by the need to offer a state-backed alternative to cryptocurrencies.”
Today, the e-CNY (digital Yuan) pilot study is the “largest of any nation exploring CBDCs.”
By 2031, the Juniper Research report pointed out that the number of global payments made using CBDCs will reach 7.8 billion, up from 307.1 million in 2024.
- This remarkable 2,430% growth will be driven by central banks seeking to
safeguard monetary sovereignty in the face of card network dominance and growing stablecoin popularity. Collaborative projects such as mBridge and Project Icebreaker, which seek to connect national CBDCs, will leave nations less reliant on established payment rails. - Through the use of CBDCs and stablecoins, cross-border payments will save $45 billion by 2031. Currently, remittance senders and global businesses are increasingly being burdened by high fees and limited visibility.
- CBDCs and stablecoins streamline transfers by bypassing costly intermediaries, enabling direct transactions on decentralised or central bank controlled networks.
- Emerging payment technologies, like CBDCs and stablecoins, will streamline international payments. These innovative technologies will help grow the digital economy and increase global financial inclusion by reducing the reliance on the US dollar for international settlements.
- In order to fully address the current inefficiencies that central banks face within
current cross-border settlement systems, creating interoperability between
different wholesale CBDCs is essential. - To do this, central banks must seek to participate in projects pioneered by global organisations such as BIS, allowing them to test their infrastructure and contribute to the design of multilateral interoperability standards. Without this collaboration the CBDC ecosystem risks fragmentation, resulting in ‘digital islands’ that fail to enhance the efficiency of cross-border payments.