The Central Bank of Jordan is closer to taking the next step towards a retail central bank digital currency (rCBDC) with the completion of an International Monetary Fund (IMF) white paper on the country’s markets. The IMF undertook a three-month mission last year to help the bank prepare a feasibility report on the CBDC. The IMF released its report on February 23.
The IMF, which worked between July and September 2022, assessed the existing retail payments market in the country very positively, describing it as well integrated. Two non-bank payment service providers (PSPs) have “generally accessible and appropriate products” and the country has high smartphone penetration, according to the report.
However, an rCBDC would improve financial inclusion by serving residents without smartphones. An rCBDC could also improve the national payment system by making its infrastructure available to PSPs and reducing the cost of cross-border transfers.
Jordan IMF technical assistance on retail Cross Border Digital Currency (rCBDC): “a cross-border rCBDC could add value, particularly if the authorities coordinate with other countries in the region.” #CBDC https://t.co/zlTeY8waB9
—Kevin Carey (@Kevin_Carey_WB) February 22, 2023
The IMF warned against disintermediation in the Jordanian financial system, as it could contribute to instability in times of stress. The Jordanian financial sector has good governance and information security management practices, according to the IMF, but an rCBDC could increase cybersecurity risks by being an attractive target. “Strong legal foundations for an rCBDC should also be created,” the report said. And concluded:
“An rCBDC may offer some advantages, but it does not necessarily address pain points. On the other hand, a cross-border rCBDC could add value, especially if authorities coordinate with other countries in the region.”
The poor financial culture and the persistence of the cash culture are some of the pain points that an rCBDC would not solve.
The Jordanian central bank announced that it was investigating a CBDC in February 2022. Cryptocurrency trading is illegal in Jordan. A central bank proposal to introduce cryptocurrency trading met with resistance in Parliament.
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