Central bank digital currencies (CBDCs) have the potential to advance financial inclusion and lower the cost of financial services, the International Monetary Fund (IMF) has found, after conducting a survey of 19 countries currently exploring the introduction of a CBDC.
Almost two-thirds of countries in the Middle East and Central Asia are researching CBDC, the survey showed, as the nations look for ways of promoting financial inclusion and improving the efficiency of cross-border payments.
While many of the 19 countries currently exploring a CBDC are at the research stage, Bahrain, Georgia, Saudi Arabia, and the United Arab Emirates have moved to the more advanced “proof-of-concept” stage.
CBDCs can allow for transactions to be settled more directly and with less intermediation, in turn lowering the cost of financial services and making them more accessible. Similarly, CBDCs could also encourage upgrading technology platforms and the efficiency of payment services, helping financial services reach more people.
However, the survey noted that adopting a CBDC “requires careful consideration” and noted that improving other digital payment systems “may be a more practical alternative to CBDCs”. The IMF noted that cross-border technology platforms such as the UAE’s Buna have been able to address these issues and promote digital currency payments between countries.
“Ultimately, introducing digital currencies will be a long and complicated process that central banks must approach with care,” the IMF said. “Policymakers need to determine if a CBDC serves their country’s objectives and whether the expected benefits outweigh the potential costs, risks for the financial system, and operational risks for the central bank.”
