A recent survey conducted by the International Monetary Fund (IMF) among 19 central banks in the Middle East and Central Asia (ME&CA) region suggests that CBDCs may not be necessary to achieve the intended policy objectives. The survey indicates that while CBDCs can enhance financial inclusion and reduce the cost of financial services, adopting such a digital currency requires careful evaluation of underlying constraints and the potential of improving existing digital payment systems as a practical alternative.
CBDCs hold the promise of advancing financial inclusion by providing easier access to financial services for unbanked populations. Additionally, the digital nature of CBDCs can significantly lower the cost of financial transactions. However, the survey highlights that improving other digital payment systems might be a more feasible and cost-effective strategy for many countries. The IMF has been actively researching CBDCs and advising member nations on their integration into national monetary systems. A senior IMF official mentioned the potential for a global CBDC platform to reduce payment costs through capital controls, illustrating the broader benefits of a well-implemented digital currency system.
Several nations in the ME&CA region are already exploring the use of CBDCs. For example, Saudi Arabia’s central bank recently participated in a cross-border CBDC experiment with the Bank for International Settlements (BIS) aimed at facilitating international trade. In her comments, IMF Managing Director Kristalina Georgieva has noted that CBDCs could potentially replace cash in island economies, reflecting the varied motivations and potential applications of digital currencies across different regions.
Despite the potential benefits, the IMF survey underscores the need for careful consideration before adopting CBDCs. Policymakers must evaluate whether a CBDC aligns with their country’s objectives and if the expected advantages surpass the associated costs and risks. The IMF also warns that CBDCs might compete with traditional bank deposits, which account for about 83% of funding for banks in the ME&CA region. This competition could negatively impact bank profits and lending, thereby posing risks to financial stability.
Trump Supports Crypto and Opposes CBDCs in Campaign SpeechThe survey reveals that central banks in the region are primarily focused on how CBDCs can enhance financial inclusion and improve payment system efficiency. In oil-exporting countries and the Gulf Cooperation Council, the priority lies in making domestic and cross-border payments more efficient. Conversely, in oil-importing countries, the Caucasus, Central Asia, and low-income countries, expanding financial inclusion is the primary concern.
Related reports by CryptoTale reveal that The Bank for International Settlements (BIS) has recently emphasized the necessity for nations to establish legal frameworks for CBDCs. BIS General Manager Augustin Carstens highlighted the importance of clear legal guidelines to avoid hindrances in deploying CBDCs. Carstens stated that central banks have a responsibility to meet public demands and drive innovation in the financial system but must collaborate closely with other stakeholders, including the private sector, to achieve these goals effectively.
