coingeek.com
After conducting a three-month-long mission on Jordan’s payments space, the International Monetary Fund (IMF) has released a technical report on the viability of a central bank digital currency (CBDC).
The report seeks to offer Jordan’s central bank additional insights into the “pain points” a retail CBDC could address for citizens. The technical report is coming on the heels of the Central Bank of Jordan’s announcement that it is working on a CBDC feasibility report.
According to the IMF study, the Jordanian retail payment space appears healthy, allowing citizens “to make interoperable transactions between banks and non-bank Payment Service Providers (PSPs).” Despite the well-integrated nature of local financial space, the IMF points out that the cost of cross-border payments could be reduced by using a retail CBDC saddled with such functions.
“Despite generally accessible and appropriate product offerings and an enabling environment, various barriers prevent customers from extensively using digital means of payment,” said the IMF. “rCBDC (retail CBDC) might create an opportunity to overcome these barriers, thus making a cross-border rCBDC worth consideration.”
Another perk accompanying the launch of the Jordanian retail CBDC includes the improvement of financial inclusion with the functionality of allowing individuals without smartphones to interact with the CBDC. Aside from extolling the virtues of a retail CBDC, the IMF warned that delving into CBDCs could open the financial system to an array of risks.
“However, the Central Bank of Jordan (CBJ) should rigorously evaluate benefits against risks and costs before forging ahead,” said the IMF. “Meanwhile, the CBJ should develop the capacity to address technology, cybersecurity, financial integrity, and legal issues.”
The IMF also pointed out that launching a retail CBDC will be insufficient in solving the nagging issues of low financial illiteracy and a pervasive cash culture. Since February 2022, Jordan’s central bank has been carrying out research into the pros and cons of CBDCs, opting to adopt a slow-and-steady approach.
CBDCs face an uphill climb
CBDCs are facing a difficult patch as they scramble for consumers and market share with pre-existing payment services.
To entice users, the People’s Bank of China (PBoC) has added a slew of features to the digital yuan wallet, including the red packet feature allowing users to send New Year gifts to family and friends. Prior to the PBoC’s move, Chinese payment platforms like Alipay and WeChat Pay have been offering similar features to their customers.
Nigeria and its eNaira have not fared any better as the CBDC’s transaction volume fell below expectations. Bereft of options, the Nigerian central bank is turning to new technology partners to stimulate adoption amongst residents.
Watch: CBDCs and BSV