With many central banks across the world working on digital currency, the dominance of the US dollar may become a thing of the past. Industry leaders believe emerging markets are at the forefront of the central bank digital currency (CBDC) movement. This trend is attributed to economies having more pressing, fundamental needs than those of more developed markets.
Steve Aschettino, a Norton Rose Fulbright partner, highlighted that emerging economies view CBDCs as a way to jump-start their economies. He said the more-developed nations already have existing and widely adopted electronic payment mechanisms in place. But the existing payments technology can serve as a barrier to the creation and broad adoption of CBDC.
The Bank for International Settlements, in a report earlier this month, said emerging markets looking into CBDCs have similar goals and motivations. It stated that providing a cash-like digital means of payment is the most common consideration. Other significant considerations are strengthening competition among payment service providers, reducing the costs of financial services, and increasing efficiency.
Richard Byles, the Governor of the Central Bank of Jamaica, pointed out that CBDCs allow for cheaper, safer, and more efficient transactions for cash-driven economies like Jamaica. He believes digital currencies can solve problems faced by high cash-volume businesses. With digital currencies, they can easily store and transport them.
EMTECH, a CBDC infrastructure provider that has worked with the Bank of Ghana and Central Bank of Nigeria, recently partnered with HaitiPay to demo a CBDC and fintech proof-of-concept in the region. Carmelle Cadet, the founder, and CEO of EMTECH, said they will show the impact of the CBDC on the Haitian economy. She highlighted that there are many people who are unbanked and underbanked. Cadet believes that the solution lies in blockchain technology. The solution could bypass where people are from and how much money they had, and get them access to better financial resources.
Kenneth Goodwin, the director of regulatory and institutional affairs at Blockchain Intelligence Group, pointed out that most CBDCs are in the early pilot stages. Those that have progressed are not yet widely used. Goodwin highlighted the Bahamas’ Sand Dollar as an example. It became the world’s first CBDC in 2020 but has faced distribution issues.