IMF offers guidance to Jordan on developing retail CBDC
The International Monetary Fund (IMF) has recently given tips to the central bank of Jordan on how to develop a retail central bank digital currency (CBDC). The move comes as many countries around the world are exploring the potential benefits of CBDCs, which are digital versions of fiat currencies issued and backed by central banks.
According to a recent report from the IMF, retail payment systems in Jordan are already highly integrated, allowing customers to make interoperable transactions between banks and non-bank Payment Service Providers (PSPs). However, the report notes that the country’s cross-border remittance market could benefit from the reduced transaction costs associated with a retail CBDC.
The IMF’s support for CBDCs is not surprising, given their potential to offer settlement finality, liquidity, and integrity, which are unique advantages of central bank money in the digital economy, as noted in a recent report from the Bank for International Settlements (BIS).
The Jordanian central bank has already been investigating the potential for a CBDC, despite the fact that cryptocurrency trading is currently illegal in the country. However, the parliament has opposed a central bank proposal to bring crypto trading.
In November 2022, the IMF staff reached a staff-level agreement with Jordan on the review under the Extended Fund Facility (EFF) arrangement. This agreement is subject to approval by the IMFs management and the Executive Board.
The IMF’s tips for Jordan’s central bank on developing a retail CBDC come as CBDCs are seeing growing adoption around the world. The Monetary Authority of Singapore (MAS) is also tackling hurdles to overcome before mass adoption of CBDCs can be possible.
While some experts argue that a retail CBDC may not be essential or even desirable, a wholesale CBDC is worth considering, according to a recent paper by David Andolfatto of Simon Fraser University. Andolfatto notes that a wholesale CBDC would be a variation on the theme that would permit free-entry into the business of narrow-banking.
Overall, the IMF’s tips for Jordan’s central bank on developing a retail CBDC could have significant implications for the country’s financial system, as well as for the wider adoption of CBDCs around the world.