BIS publishes a paper on CBDCs and their role in financial inclusion for the unbanked.

The Bank for International Settlements, or BIS, published a paper Tuesday on central bank digital currencies, or CBDCs, and how they may be used to reach policy objectives for financial inclusion. The study relied on interviews conducted in the second half of last year with nine central banks that were already working on retail CBDCs. It compared similar aims and barriers to inclusion across a range of economic development stages.

The authors identify two distinct CBDC strategies. Some central banks regarded digital currency as a stimulus for innovation and growth, while others saw it as a supplement to current efforts. Education and acceptance of stakeholders, both by customers and service providers, were all emphasised.

Money laundering and the financing of terrorism were identified as major issues, as well as data privacy. The goal of the new report was to determine how secure and resilient a defense-in-depth architecture is in the face of emerging threats. In particular, it addressed issues that had not been addressed by previous research. Security for children, the elderly, and people who are disabled was also highlighted as a top priority.

Among the central banks, there were distinct differences in terms of challenges like geographical isolation and levels of digitisation. However, several CBDC design elements were identified as essential to financial inclusion across the board. In this case, promoting a two-tiered payment system with commercial sector participants, interoperability across a variety of functions and borders, and appropriate regulation were all mentioned.

The Bahamas, Canada, China, the Eastern Caribbean, Ghana, Malaysia, the Philippines, Ukraine and Uruguay were among the central banks studied in this paper. The World Bank collaborated on the study as well.

The Bank for International Settlements has taken a strong position on the role of the central bank in the evolving digital economy, as well as the necessity for cryptocurrency regulation. The project has already completed a successful test, dubbed Project Dunbar, with the central banks of Australia, Malaysia, Singapore, and South Africa to build an international settlements infrastructure.

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