{
  "title": "Central Bank Digital Currencies Can Boost Middle East's Financial Inclusion, Payment Efficiency",
  "publication": "IMF Blog, June 18, 2024",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency",
  "canonical": "https://www.imf.org/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency",
  "overlayPath": "/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency/index.md",
  "summary": "19 countries in the Middle East and Central Asia are exploring issuing a CBDC",
  "sections": [
    {
      "heading": "Regional uptake and stages of development",
      "content": "- Almost two-thirds of countries in the Middle East and Central Asia are exploring adopting a central bank digital currency (CBDC).\n- 19 countries in the Middle East and Central Asia are exploring issuing a CBDC.\n- Many of the 19 countries currently exploring a CBDC are at the research stage.\n- Advanced proof-of-concept stage countries: Bahrain, Georgia, Saudi Arabia, and the United Arab Emirates.\n- Most advanced: Kazakhstan, after two pilot programs for the digital tenge."
    },
    {
      "heading": "Potential benefits and priorities",
      "content": "- Financial inclusion:\n  - 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.\n  - Lower intermediation could lower the cost of financial services and make them more accessible.\n  - Central banks, unlike commercial banks, are not concerned with making a profit and can help keep costs lower.\n  - Increased competition could encourage upgrading technology platforms and the efficiency of payment services, helping financial services reach more people.\n  - Countries especially interested in financial inclusion benefits: countries in the Caucasus and Central Asia, Middle East and North Africa oil importers, and low-income countries.\n- Cross-border payment efficiency:\n  - CBDCs can potentially help improve the efficiency of cross-border payment services and significantly cut transaction costs if they address frictions such as varying data formats, operating rules across regions, and complex compliance checks.\n  - Cross-border efficiency is an important priority for oil exporters and the Gulf Cooperation Council countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.\n  - Example of an existing cross-border platform: the Buna cross-border payment system, created by the Arab Monetary Fund in 2020."
    },
    {
      "heading": "Risks and constraints",
      "content": "- Uptake constraints:\n  - Without remedying barriers—low digital and financial literacy, lack of identification, distrust of financial institutions, and low wealth—CBDC uptake may only have marginal benefits.\n- Financial stability and banking sector implications:\n  - Deposits make up a large share of bank funding in the region, about 83 percent.\n  - A CBDC may compete with bank deposits, potentially weighing on bank profits and lending and having implications for financial stability.\n  - Lenders in the region generally have adequate capital levels, profit margins, and liquidity buffers; relatively high concentration may limit strains on deposits. Large banks are especially dominant in Gulf Cooperation Council countries.\n- Monetary policy effects:\n  - CBDCs could strengthen the pass-through into deposit rates by increasing competition among banks.\n  - A CBDC could also strengthen the bank lending channel of monetary policy.\n  - Impacts are likely country-specific and difficult to estimate because CBDC uptake is limited so far.\n- Operational and design risks:\n  - Introducing digital currencies will be a long and complicated process with operational risks for the central bank.\n  - Policymakers must determine whether the expected benefits outweigh potential costs and risks for the financial system."
    },
    {
      "heading": "Design considerations and mitigation options",
      "content": "- Prerequisites and institutional capacity:\n  - While there are no clear prerequisites to adopting CBDCs, a healthy banking system, a sound legal system, and strong supervisory and regulatory capacity are the most important for reducing risks.\n- Design features to limit risks:\n  - Use carefully calibrated restrictions on CBDC balances and transactions to limit competition with bank deposits.\n  - Design CBDCs to work offline to promote financial inclusion in areas with spotty mobile service (relevant for low-income countries and fragile and conflict-affected states).\n  - Use CBDCs for cross-border transfers to help lower the cost of sending remittances and speed up transfer times.\n- Alternatives to CBDC adoption:\n  - Adoption may not be essential to achieving intended policy goals; addressing underlying constraints or adopting/improving other digital payment systems could be more practical alternatives."
    },
    {
      "heading": "IMF support and next steps",
      "content": "- The IMF is helping countries explore CBDCs through capacity development and surveillance:\n  - Support for policymakers evaluating the need to issue a CBDC and crafting strong policies and regulatory frameworks to minimize monetary and financial stability risks.\n  - Publishing new chapters of the IMF CBDC handbook, guided by country capacity development questions on evaluating the need and risks, and developing concrete plans to issue a CBDC.\n\nThis summary is based on the IMF blog \"Central Bank Digital Currencies Can Boost Middle East's Financial Inclusion, Payment Efficiency\" (June 18, 2024).\n\n---\n\n\n References\n\n- digital tenge\n- cost of sending remittances\n- helping countries explore CBDCs\n- CBDC handbook\n- Central Bank Digital Currencies in the Middle East and Central Asia\n- More African Central Banks Are Exploring Digital Currencies\n\nSource: https://www.imf.org/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency"
    }
  ],
  "bullets": [
    "[Markdown version](/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency/index.md)",
    "[Structured JSON version](/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency/index.json)",
    "[Bundle manifest](/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency/bundle-manifest.json)",
    "Authors: Serpil Bouza, Marcello Miccoli, Borislava Mircherva",
    "Published: June 18, 2024",
    "Almost two-thirds of countries in the Middle East and Central Asia are exploring adopting a central bank digital currency (CBDC).",
    "19 countries in the Middle East and Central Asia are exploring issuing a CBDC.",
    "Many of the 19 countries currently exploring a CBDC are at the research stage.",
    "Advanced proof-of-concept stage countries: Bahrain, Georgia, Saudi Arabia, and the United Arab Emirates.",
    "Most advanced: Kazakhstan, after two pilot programs for the digital tenge.",
    "Financial inclusion:",
    "Cross-border payment efficiency:",
    "Uptake constraints:",
    "Financial stability and banking sector implications:",
    "Monetary policy effects:",
    "Operational and design risks:",
    "Prerequisites and institutional capacity:",
    "Design features to limit risks:",
    "Alternatives to CBDC adoption:",
    "The IMF is helping countries explore CBDCs through capacity development and surveillance:",
    "[digital tenge](https://www.elibrary.imf.org/view/journals/002/2024/047/article-A002-en.xml)",
    "[cost of sending remittances](https://www.imf.org/en/Blogs/Articles/2024/01/03/how-training-and-advice-can-speed-cross-border-payments-and-cut-costs)",
    "[helping countries explore CBDCs](https://www.imf.org/en/Blogs/Articles/2023/11/20/central-bank-digital-currency-development-enters-the-next-phase)",
    "[CBDC handbook](https://www.imf.org/en/Topics/fintech/central-bank-digital-currency/virtual-handbook)",
    "[Central Bank Digital Currencies in the Middle East and Central Asia](https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2024/04/26/Central-Bank-Digital-Currencies-in-the-Middle-East-and-Central-Asia-543566)",
    "[More African Central Banks Are Exploring Digital Currencies](https://www.imf.org/en/Blogs/Articles/2022/06/23/blog-africa-cbdc)"
  ],
  "alternates": {
    "markdown": "/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency/index.md",
    "json": "/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency/index.json",
    "bundleManifest": "/en/blogs/articles/2024/06/18/central-bank-digital-currencies-can-boost-middle-easts-financial-inclusion-payment-efficiency/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-08-28T18:07:57.311Z"
}