MIT-led Research Evaluates CDBC Inclusiveness in Four Countries
A new study conducted by the Massachusetts Institute of Technology (MIT) along with the Digital Currency Initiative (DCI) and other organizations revealed the inclusion issues related to central bank digital currency (CBDC). The 15-month survey, which included four low and middle-income countries (Indonesia, India, Mexico, and Nigeria), was released on January 13.
Harnessing CBDC
The study noted that despite the large body of work regarding central bank digital currency (CBDC), only a few offered meaningful use cases on how CBDC can promote financial inclusion. Furthermore, the researchers considered the various CBDC design options, existing financial structures, and user experiences based on actual use cases.
The authors also stressed the differences between intermediate and non-intermediate payment gateway. They opined that one of the critical risk factors is that an intermediate CBDC will duplicate a design and harm existing intermediate forms of money.
Moreover, all six existing CBDC projects use the intermediate cash models, but the researchers stayed neutral about using distributed ledger technology (DLT). The research also listed some uses that monetary authorities can leverage with the DLT in intermediate and non-intermediate models.
In addition, users can also assess the technology’s real-world benefits and its accompanied issues. With about a quarter of the world’s adult population still unbanked, and many more without identification, the study stressed that countries could still consider the technology they can use to build their CBDC.
Meanwhile, the survey also considers trust as another severe concern for vulnerable users of the CBDC, especially with the increasing challenges of regulating blockchain and the surveillance of individuals by some countries. The paper stated that individuals increasingly find it challenging to trust the use of CBDC as government policies affect their perception of the technology.
Russia Eyes CBDC Settlement System
Amid biting sanctions from the international community, the Russian central bank is set to begin the development of a cross-border settlement system. The new move will see Russia use the CBDC technology to streamline its international payment system as it faces an increasingly global economic embargo following its invasion of Ukraine.
Accordingly, the monetary regulator plans to move forward with the country’s digital Ruble in the year’s first quarter. According to reports, the Russian central bank will examine two cross-border settlement systems to determine the most suitable one.
A breakdown of the proposed models shows that the first will require Russia’s trading partners to sign a separate bilateral agreement to integrate their unique CBDC system. For the agreement, the countries are required to ensure that the conversion and transfer of funds between them and Russia are in line with the rules of the partnership.
Furthermore, the second model appears more complicated as it suggests a single platform to enable Russia to interact with its trading partners by sharing protocols and ethics to facilitate payment between them. Meanwhile, the first model is the preferred line of action, while the second is considered to be more advanced due to its technological and political demands.
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