Arjun Pathy

The adoption of Central Bank Digital Currency (CBDC) in emerging economies like Nigeria and Angola could significantly enhance financial inclusion by providing access to banking services for the unbanked, streamline transactions, and offer new tools for monetary policy. Unlike richer countries such as China, Russia, and India, where the financial infrastructure is already developed, the impact in these emerging markets could be transformative, making financial services more accessible and efficient. However, it also raises concerns about privacy and the potential for increased surveillance, highlighting the need for careful implementation.

Started Jan. 4, 2024

Abstract or project description

Amidst the growth of cryptocurrencies and a global move towards digitization of economic processes, Central Bank Digital Currencies (CBDCs) have gained popularity. 134 countries representing 98% of global GDP are at some point in the process of adopting a CBDC. Acting as legal tender issued by the central banks, CBDCs pave the way for increased financial inclusion, efficiency, transaction speed, competitiveness, and monetary and fiscal policy transmission. These potential benefits are amplified in emerging economies that experience high remittance and banking costs and rely on cash. A CBDC can halve the cost of remittance after subtracting foreign exchange costs and lead to 6% output gains and 2% welfare gains amongst other improvements. Case studies of early adopters - Jamaica, The Bahamas, and Nigeria - reveal low adoption rates, but a preservation of financial intermediation. China, India, and Russia, which are all undergoing pilot programs stand to benefit CBDC greatly but require improved legal frameworks to mitigate safety concerns.