CENTRAL banks should consider digital currencies which could improve financial inclusion efforts in countries, according to the Asian Development Bank (ADB).
In an Asian Development Blog, ADB South Asia Department’s Lotte Schou-Zibell said central bank currencies are issued and regulated by governments and can serve unbanked and under-banked populations.
These digital currencies, Schou-Zibell said, are less risky compared to digital currencies such as Bitcoin or Ether because Central Banks back these currencies.
“It is time for central banks also in developing countries to explore and better understand central bank digital currencies in
their continued efforts to follow global best practices as the economies become increasingly digitized,” Schou-Zibell said.
These currencies have the potential to allow people in remote areas to make payments without needing a bank account. This can be useful in areas frequented by disasters or have unreliable access to electricity and the internet, Schou-Zibell added.
“Remote and sparsely populated countries can potentially benefit from government-backed digital currencies to leap-frog the limitations of traditional currencies, get more people into financial systems and overcome challenges in cross-border payments,” he argued.
For central banks to succeed in this regard, however, there must be support from government bodies, end-users, financial institutions, technology and infrastructure providers, academia, and standards development organizations.
It is also important for central banks to have a framework by which they can evaluate the readiness of the infrastructure; e-commerce penetration; mobile-money penetration; and regulation.
Countries must also establish a corridor risk assessment measure that simplifies the prevention of money laundering in lower-risk transactions.
Bangko Sentral ng Pilipinas (BSP) Department of Economic Research Director Lara Romina E. Ganapin earlier said the BSP is assessing the potential impact of climate change on the conduct of monetary policy and how this can be integrated into the Central Bank’s monetary policy framework.
She also said the BSP is looking to “pilot [a] wholesale central bank digital currency [CBDC]” which will be done next year. Through the project, the Central Bank can better examine the feasibility of a wholesale CBDC in the country.