Central Bank Digital Currency and Financial Inclusion
A discussion paper from the Bank of Canada highlights the potential for central bank digital currency (CBDC) to enhance financial inclusion. However, the paper acknowledges that there are various challenges that central banks will face in achieving this goal. The authors argue that three types of inclusion are necessary for a universally accessible payment method: financial inclusion, digital inclusion, and practical accessibility. They also note that private financial institutions may not prioritize serving underserved individuals. Therefore, it is crucial to address all three aspects of accessibility to ensure that a CBDC does not perpetuate existing disadvantages.
Barriers to Accessibility
The authors of the paper identify several barriers to accessibility that need to be considered when implementing a CBDC. For example, members of First Nations in Canada live further away from financial institutions compared to other Canadians, which would require digital inclusion for their financial inclusion. Additionally, concerns about financial literacy and ease of use could hinder adoption, with older individuals and those with limited internet skills facing greater challenges. The authors emphasize the need for further research into designing digital financial technology that is cognitively accessible.
Hot Take: Ensuring Inclusive CBDC Adoption
While CBDC has the potential to boost financial inclusion, it is crucial to address the barriers that could hinder accessibility. Central banks must prioritize financial, digital, and practical inclusion to ensure that underserved individuals are not left behind. This requires collaboration with private financial institutions and a focus on designing user-friendly technology that accommodates diverse needs. By addressing these challenges, central banks can create a CBDC that truly promotes financial inclusion for all.
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