An IMF survey reveals that Central Bank Digital Currencies (CBDCs) could enhance financial inclusion and payment efficiency in the Middle East and Central Asia, though their adoption requires careful consideration of underlying constraints and alternatives.
A recent survey by the International Monetary Fund (IMF) has revealed that Central Bank Digital Currencies (CBDCs) hold significant potential for enhancing financial inclusion and payment efficiency in the Middle East and Central Asia (ME&CA). While not deemed essential, CBDCs could offer notable benefits if adopted alongside efforts to overcome existing financial barriers in the region.
Key Points:
Survey Insights:
The IMF surveyed 19 central banks in the ME&CA region.
The survey concluded that CBDCs could advance financial inclusion and reduce the cost of financial services.
Potential Benefits:
CBDCs could improve payment system efficiency and support financial inclusion.
They may offer a more practical alternative to existing digital payment systems in certain contexts.
Challenges and Considerations:
Adopting CBDCs requires careful consideration of potential costs, risks to the financial system, and operational challenges for central banks.
The IMF emphasizes the need to address other barriers, such as low digital and financial literacy, lack of identification, and distrust of financial institutions, to fully realize the benefits of CBDCs.
Regional Initiatives:
Countries like Saudi Arabia have already explored cross-border CBDC experiments with international partners.
The IMF's Managing Director Kristalina Georgieva has suggested that CBDCs could replace cash in certain island economies.
Financial Stability Concerns:
The survey warns that CBDCs could compete with bank deposits, potentially impacting bank profits and lending, and thus financial stability in the region.
About 83% of funding for banks in the ME&CA region comes from deposits, highlighting the need for a balanced approach.
The IMF survey highlights the promising role of CBDCs in enhancing financial inclusion and payment efficiency in the ME&CA region.
However, successful adoption will depend on addressing existing financial and digital literacy barriers and carefully considering the potential risks and costs.
As the region explores CBDC adoption, policymakers must weigh the benefits against the challenges to ensure financial stability and broader economic growth.
Source: Coindesk
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