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 especially
accelerated during the COVID-19 pandemic, many national governments are exploring the idea of implementing
central bank digital currencies (CBDCs). While CBDCs are like cryptocurrencies in that they are digital, their
overarching concept is different. They are issued by a country’s central bank or monetary authority under
government control, so they are centralized and equal in value to the nation’s fiat currency. This article aims to
provide a succinct summary of what CBDC implementation could mean for nations and their citizens, with a focus
on the possible routes in and impacts on developing countries in light of the potential that CBDCs could provide
them. Section 1 explores the rise of CBDCs, namely, the recent surge in developing nations’ interest in them
worldwide. Section 2 discusses the benefits of CBDCs, partitioning the potential upsides into four major
points—greater accessibility, easier domestic and cross-border transactions, cost-efficient management, and more
transparent foreign aid—with a focus on developing countries. Section 3 provides a list of the challenges
accompanying 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 and
the BIS, could play in the entire process writ large, ranging from setting international standards, intervening during
financial crises, and providing infrastructural support to incentivizing CBDC adoption. Section 5 concludes the
article.