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IMF Proposes Tailored Approaches to CBDCs for Pacific Island Nations
**By Gurjinder Cheema, March 26, 2024**
In a recent report, the International Monetary Fund (IMF) has presented tailored recommendations for Central Bank Digital Currencies (CBDCs) in Pacific Island countries, taking into account their existing financial infrastructure and currency frameworks.
For nations in the region with established national currencies and robust banking systems, the IMF suggests a nuanced approach: a two-tier CBDC model. Under this model, the central bank would issue the digital currency while entrusting its day-to-day operations to private intermediaries. This framework aims to leverage the benefits of CBDCs while maintaining the efficiency of the private sector in financial transactions.
However, for countries without their own currencies, the IMF report proposes an alternative route. It suggests considering foreign currency-based stablecoins as a viable option, albeit with stringent regulations and supervision to mitigate potential risks. Notably, none of the Pacific Island nations have officially embraced private cryptocurrencies or stablecoins, although a handful, including Fiji, Palau, Solomon Islands, and Vanuatu, are exploring the concept of CBDCs.
The IMF’s advocacy for CBDCs remains steadfast, with Managing Director Kristalina Georgieva highlighting their potential to coexist with traditional cash and private money, offering a secure and cost-effective means of financial transactions.
According to data from the Atlantic Council CBDC tracker, 130 countries, representing 98% of global GDP, are actively exploring CBDCs, with 19 G20 countries advancing in their development. Eleven countries have already fully launched a CBDC, including China, The Bahamas, Nigeria, Anguilla, Jamaica, and several Eastern Caribbean nations.
Interestingly, the United States, despite its prominent position in the global economy, has yet to confirm plans for a digital currency launch. While the country progresses on a wholesale CBDC targeting bank-to-bank transactions, some US lawmakers, like Florida Governor Ron DeSantis, have expressed strong opposition to CBDCs, citing privacy concerns.
Governor DeSantis, now a Republican presidential candidate, signed a bill last year banning CBDCs in Florida, asserting that such initiatives pose a threat to financial privacy, consumer choice, and market competitiveness. His stance underscores the ongoing debate surrounding CBDCs, both globally and domestically, as nations navigate the complexities of digital currency adoption in an increasingly interconnected world.
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