Rise of Digital Money: Implications for Pacific Island Countries
Departmental Papers, February 25, 2024
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- Rise of Digital Money: Implications for Pacific Island Countries
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Bibliographic details
- Authors: Yong Sarah Zhou, Tao Sun, Anca Paduraru, Arvinder Bharath, Stephanie Forte, Kathleen Kao, Miss Yinqiu Lu, Maria Fernanda Chacon Rey, Piyaporn Sodsriwiboon, Chia Yi Tan, Bo Zhao
- Published: February 25, 2024
- Series: Departmental Papers
- DOI: https://doi.org/10.5089/9798400263071.087
Overview
- Departmental paper examining the fast-evolving landscape of digital money in Pacific Island Countries (PICs), a diverse region of extremes in size, remoteness and dispersion.
- Focus: development of digital money and payment systems in PICs; assessment of potential benefits and risks; prerequisites for adoption; and a proposed strategic framework for policy decisions.
- Emphasis on balancing opportunities to advance public policy goals (financial inclusion and improved cross-border connectivity) with caution about rapid and inadequately regulated adoption.
- Advocates a gradual, well-informed approach tailored to PICs' monetary and financial circumstances, and suggests a regional approach to address capacity and scalability challenges.
Key findings and implications
- Digital money can enhance financial inclusion and payment efficiency in PICs given the region’s specific characteristics.
- Significant macroeconomic and financial consequences accompany the rise of digital money in the region.
- Potential benefits highlighted:
- Enhanced financial inclusion.
- Improved cross-border connectivity and payment efficiency.
- Potential risks highlighted:
- Risks from rapid and inadequately regulated adoption.
- Monetary and financial stability risks given the presence of national currencies and varying maturity of payment systems.
- Prerequisites for successful adoption include adequate regulatory frameworks, readiness of payment systems, and institutional capacity.
Strategic framework and policy recommendations
- Advocate a gradual, well-informed, and tailored approach to digital money introduction in PICs.
- Recommend aligning digital money initiatives with PICs' unique monetary and financial circumstances, including consideration of:
- Presence of national currencies.
- Maturity of payment systems.
- Propose exploring regional approaches to:
- Address capacity constraints.
- Achieve scalability in introducing new digital money forms and payment methods.
- Stress the need for adequate regulation to minimize risks, including Anti-money laundering and combating the financing of terrorism (AML/CFT) considerations.
Subjects, focus areas, and keywords
- Subjects: Anti-money laundering and combating the financing of terrorism (AML/CFT), Central Bank digital currencies, Crime, Currencies, International organization, Money, Political economy, Technology.
- Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), Asia and Pacific, CBDC, Central Bank digital currencies, Cross Border Payment, Currencies, Digital Money, digital money adoption, digital money exploration, digital money introduction, digital money revolution, digital money taxonomy, Financial Inclusion, Pacific Islands, Payment Systems, PIC authorities, TF risk.