The Digital Currency Initiative (DCI) at the Massachusetts Institute of Technology (MIT) and partner organizations brought together a large team of researchers in four low- and middle-income countries—India, Indonesia, Nigeria, and Mexico—to study inclusion issues related to currency. design of centrally issued digital currency (CBDC) for the retail sector. On January 13, they released the results of their 15-month research project.
Despite the growing number of papers related to CBDC, “few if any of its proponents have offered practical insight into how CBDC will promote greater access to financial services,” the DCI stated, along with the MIT Media Lab and Maiden Labs.
The authors considered CBDC design options, existing financial infrastructure, and user experience, based on real examples from people’s lives. They placed particular emphasis on the differences between intermediated and non-intermediated (cash) payments. They said:
“A major potential risk is that an intermediated CBDC replicates the design – and therefore the detriment – of existing forms of intermediated money.”
The six existing CBDC pilot projects currently use intermediary models. The researchers remained neutral regarding brokering and Blockchain or distributed ledger technology (DLT). Echoing a conclusion reached by the DCI in its first report on the Hamilton Project, this report stated:
“The question of whether or not to use DLT technologies really has to do with governance and trust, with some related issues around performance, rather than their ability to achieve specific features.”
The report compares five possibilities (“what a user can do with a technology”) in brokered and non-brokered systems, as well as actual uses and challenges for vulnerable users. About a quarter of the world’s adult population is unbanked, and many of those people lack identification.
Trust was as big an issue as practicalities for many vulnerable users. According to the report:
“Especially given the rise of authoritarian regimes around the world, the acceleration of the surveillance state, and the growing challenge of regulating the tech industry, it is far from obvious that people should trust a CBDC.”
The report concluded with a list of a dozen related research topics.
The MIT Digital Currency Initiative (DCI) has published a paper on the potential benefits and preconditions necessary for a CBDC to improve access to financial services and promote inclusion. Here are the key take aways (1/7)#future #CentralBanks #CDBC #digitalcurrency pic.twitter.com/YotFy52NcY
—Bilal (@TheBilalVictor) January 13, 2023
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