Nigeria, which was the second country after the Bahamas to roll out a central bank digital currency (CBDC), has dropped the project, just as Ghana, South Africa and almost two-thirds of countries in the Middle East and Central Asia are exploring adopting a digital currency towards promotion of financial inclusion and improving the efficiency of cross-border payments.
This is according to a blog post on the International Monetary Fund’s (IMF) website based on the recent departmental paper, ‘Central Bank Digital Currencies in the Middle East and Central Asia.’
It noted that countries across these regions, spanning a diverse group of economies stretching from Morocco and Egypt to Pakistan and Kazakhstan, each must weigh their own unique set of circumstances.
“Many of the 19 countries currently exploring a CBDC are at the research stage. Bahrain, Georgia, Saudi Arabia and the United Arab Emirates have moved to the more advanced ‘proof-of-concept’ stage. Kazakhstan is the most advanced after two pilot programmes for the digital tenge,” the IMF stated.
CBDCs are digital versions of cash that are more secure and less volatile than crypto assets because they are issued and regulated by central banks. In Sub-Saharan Africa, South Africa and Ghana are running pilots while other countries are in the research phase after Nigeria’s launch in October 2021.
The Bank of Ghana has announced the successful completion of cross-border trade using digital credentials, in collaboration with the Monetary Authority of Singapore.
Following this announcement, the Bank of Ghana (BoG) and the Monetary Authority of Singapore (MAS) have successfully completed the first proof of concept (POC) under Project DESFT (Digital Economy Semi-Fungible Token). The project demonstrated the use of digital credentials for international trade and cross-border payments.
In addition, both companies will focus on meeting the needs, preferences and demands of customers and partners in an ever-evolving market, while also prioritising the process of remaining compliant with the regulatory requirements and laws of the industry.
As part of its digital payments roadmap, the South African Reserve Bank (SARB) confirmed that it is progressing its CBDC work as part of Project Khokha 2x. This involves a wholesale CBDC and bank-issued stablecoins, which will be used for regional payments in Africa. Additionally, SARB set a two-year timeframe for supporting domestic stablecoins as part of a sandbox.
According to the IMF, some countries have already introduced cross-border technology platforms to address risks and promote digital currency payments between countries. One example is the Buna cross-border payment system, created by the Arab Monetary Fund in 2020.
“CBDCs can advance financial inclusion by fostering competition in the payments market and allowing for transactions to be settled more directly and with less intermediation, in turn lowering the cost of financial services and making them more accessible.
“Unlike commercial banks, central banks can also help keep costs lower as they aren’t concerned with making a profit. Similarly, the resulting increased competition in the payments market from a CBDC could also encourage upgrading technology platforms and the efficiency of payment services, helping financial services reach more people. Countries in the Caucasus and Central Asia, Middle East and North Africa oil importers and low-income countries are especially interested in this potential benefit,” it stated.
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