Almost two-thirds of countries in the Middle East and Central Asia are exploring adopting a central bank digital currency (CBDC) as a way to promote financial inclusion and improve the efficiency of cross-border payments. International Monetary Fund analysts say.
Adopting a CBDC, however, requires careful consideration.
«Countries across these regions, spanning a diverse group of economies stretching from Morocco and Egypt to Pakistan and Kazakhstan, each must weigh their own unique set of circumstances. 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. Kazakhstan is the most advanced after two pilot programs for the digital tenge.»
The fund’s analysts believe that digital currencies contribute to financial inclusion by promoting competition in the payments market and allowing for transactions to be settled more directly and with less intermediation.
«It, in turn, lowers the cost of financial services and making them more accessible. Unlike commercial banks, central banks can also help keep costs lower as they aren’t concerned with making a profit. Similarly, the resulting increased competition in the payments market from a CBDC could also encourage upgrading technology platforms and the efficiency of payment services, helping financial services reach more people. Countries in the Caucasus and Central Asia, Middle East and North Africa oil importers, and low-income countries are especially interested in this potential benefit,» the statement says.
According to IMF analysts, introducing digital currencies will be a long and complicated process that central banks must approach with care.
«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. Moreover, adoption may not be essential to achieving the intended policy goals, and addressing underlying constraints could be a more practical alternative, such as adopting or improving other digital payment systems,» IMF notes.
