A recent study conducted by the International Monetary Fund (IMF) involving 19 central banks in the Middle East and Central Asia (ME&CA) region has revealed that central bank digital currencies (CBDCs) may not be essential for achieving desired policy objectives. However, they can play a crucial role in promoting financial inclusion and reducing the cost of financial services.
The survey conducted by the IMF underscores the potential benefits of CBDCs in enhancing financial inclusion and cutting down financial service expenses. Nonetheless, it emphasizes the importance of careful consideration when deciding to adopt a CBDC.
The IMF has been actively researching the development of CBDCs and offering guidance to member countries on the potential integration of these digital currencies into their monetary systems. The survey suggests that addressing existing limitations and improving other digital payment systems might be a more practical option compared to CBDCs.
A senior official at the IMF has also highlighted the advantages of a global CBDC platform, stating that “a unified global CBDC platform that supports capital controls could reduce payment costs.” Countries in the ME&CA region, such as Saudi Arabia, have been exploring the implementation of CBDCs as a potential substitute for cash, according to previous statements by IMF’s Managing Director Kristalina Georgieva.
To address these concerns and promote digital currency payments across borders, several countries have already implemented cross-border technology platforms. For example, the Buna cross-border payment system was launched by the Arab Monetary Fund in 2020.
According to the IMF, central banks have an advantage in keeping costs low since they are not profit-driven like commercial banks. The competition in the payments market due to CBDCs could drive the adoption of advanced technology platforms and enhance payment service efficiency, thereby expanding financial services to a broader audience.
However, policymakers must be cautious in mitigating potential risks to financial stability associated with CBDCs. The IMF emphasizes the importance of a healthy banking system, a robust legal framework, and strong supervisory and regulatory capacity in reducing these risks.
Selecting the appropriate features for CBDC implementation poses a significant challenge for regional policymakers, but making the right design choices is crucial for achieving policy objectives of enhancing financial inclusion and payment system efficiency.
As part of its initiatives, the IMF is assisting countries in exploring CBDCs through capacity development and surveillance. The organization aims to help policymakers evaluate the necessity of issuing a CBDC and develop robust policies and regulatory frameworks to minimize risks to monetary and financial stability.
Lastly, the IMF is releasing new chapters of its CBDC handbook, focusing on specific questions related to country capacity development, risk evaluation, and concrete plans for CBDC issuance.
