CBDCs and the More Proactive Roles of International Organizations

Abstract

With the rise of cryptocurrency, along with the downward trend of physical currency usage, which was especiallyaccelerated during the COVID-19 pandemic, many national governments are exploring the idea of implementingcentral bank digital currencies (CBDCs). While CBDCs are like cryptocurrencies in that they are digital, theiroverarching concept is different. They are issued by a country’s central bank or monetary authority undergovernment control, so they are centralized and equal in value to the nation’s fiat currency. This article aims toprovide a succinct summary of what CBDC implementation could mean for nations and their citizens, with a focuson the possible routes in and impacts on developing countries in light of the potential that CBDCs could providethem. Section 1 explores the rise of CBDCs, namely, the recent surge in developing nations’ interest in themworldwide. Section 2 discusses the benefits of CBDCs, partitioning the potential upsides into four majorpoints—greater accessibility, easier domestic and cross-border transactions, cost-efficient management, and moretransparent foreign aid—with a focus on developing countries. Section 3 provides a list of the challengesaccompanying CBDC implementation, such as an exhaustive complex framework, questionable financial stability,and technological infrastructure. Section 4 presents the roles that international organizations, such as the IMF andthe BIS, could play in the entire process writ large, ranging from setting international standards, intervening duringfinancial crises, and providing infrastructural support to incentivizing CBDC adoption. Section 5 concludes thearticle.