The Bank for International Settlements (BIS) released a paper on Tuesday on central bank digital currencies (CBDCs) and how they can be used to achieve financial inclusion policy goals.. The paper is based on interviews conducted in the second half of last year with nine central banks that are currently exploring retail CBDCs. It examines the common goals of a number of levels of economic development and the challenges of inclusion.
The document identified two distinct approaches to CBDCs. Some central banks saw digital currency as a catalyst for innovation and development, while others hoped it would complement existing initiatives. All central banks emphasized the need for stakeholder education and buy-in, both among consumers and service providers.
Data privacy and issues related to money laundering and terrorist financing were seen as the main challenges. Serving the most vulnerable – children, the elderly and users with disabilities – was also mentioned as a priority.
Some challenges, such as geographic isolation and levels of digitization, varied in degree across central banks, but several design features of CBDCs were highlighted as key to financial inclusion across the spectrum. The promotion of a two-tier payment system with private sector participants, interoperability across multiple functions and borders, and proper regulation were all mentioned in this context.
The central banks analyzed in the document were those of the Bahamas, Canada, China, the Eastern Caribbean, Ghana, Malaysia, the Philippines, Ukraine and Uruguay. The World Bank was also involved in the investigation.
The BIS has taken a strong stance on the place of the central bank in the emerging digital economy and the need to regulate cryptocurrencies.. A pilot project, called Project Dunbar, has recently been successfully completed with the central banks of Australia, Malaysia, Singapore and South Africa to create an international settlement platform.
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