Research Finds Minimal Impact of CBDC Adoption on Struggling Economy

New Research Shows Minimal Impact of CBDC on Struggling Economy

New research conducted by Colombia’s central bank has found that the adoption of a central bank digital currency (CBDC) would have a minimal impact on the country’s struggling economy. However, the central bank has not ruled out the possibility of implementing a CBDC, emphasizing the need for desirable features to attract a “core group of users.”

Main Breakdowns:

The research recommends a CBDC design with spending limits and no interest payments.
Colombia’s economy would benefit from a tiered architecture for the CBDC, along with holding and spending limits.
The introduction of a CBDC is expected to have negligible macroeconomic effects and avoid disruptive impacts on financial intermediation and stability.
While some countries have clear motivations for adopting a CBDC, Colombia’s need for an alternative to cash is not as immediate.
The report suggests that policymakers should focus on regulating stablecoins and developing rules for backed digital assets.

Colombia Should Push Forward on Regulating Stablecoins

The report also highlights the importance of regulating stablecoins, regardless of the implementation of a CBDC. Bank deposits in the form of digital money, backed by government and regulatory guarantees, remain the dominant form of digital currency. While stablecoins have not always been popular, recent adoption rates have increased due to factors such as a scarcity of banknotes in Nigeria. It is crucial for policymakers to stay proactive in developing regulations for stablecoins.

Hot Take

Colombia’s research provides valuable insights into the potential impact of a CBDC on a struggling economy. While the adoption of a CBDC may not be immediately necessary for Colombia, the report underlines the importance of considering desirable features to attract users. Additionally, the focus on regulating stablecoins reflects a broader trend in the global financial landscape, where policymakers are recognizing the need for oversight and rules for digital assets.