The Central Bank of Jordan is closer to its next step toward a retail central bank digital currency (rCBDC) with the completion of an International Monetary Fund technical report on the country’s markets. The IMF conducted a three-month mission last year to assist the bank with preparations for a CBDC feasibility report. The IMF released its report on Feb. 23.
Working between July and September 2022, the IMF gave the country’s existing retail payment market a largely positive review, calling it well integrated. Two non-bank payment service providers (PSPs) have “generally accessible and appropriate product” and the country has high smartphone penetration, the report noted.
Nonetheless, an rCBDC would enhance financial inclusion by providing services to residents without smartphones. An rCBDC could also improve the domestic payment system by making its infrastructure available to PSPs and lowering the cost of cross-border transfers.
Jordan IMF technical assistance on retail Cross Border Digital Currency (rCBDC): “a cross-border rCBDC could add value, particularly if the authorities coordinate with other countries in the region.” #CBDC https://t.co/zlTeY8waB9
— Kevin Carey (@Kevin_Carey_WB) February 22, 2023
The IMF warned to avoid disintermediation in the Jordanian financial system, as it could contribute to instability in times of stress. The Jordanian financial sector has good information security governance and management practices, the IMF found, but an rCBDC could increase cybersecurity risks as an attractive target. “Sound legal underpinnings for an rCBDC should also be created,” the report said. It concluded:
“RCBDC may offer some benefits, but it does not necessarily address pain points. On the other hand, a cross-border rCBDC could add value, particularly if the authorities coordinate with other countries in the region.”
Low financial literacy and a persistent cash culture are among the pain points an rCBDC would not address.
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The Jordanian central bank announced it was researching a CBDC in February 2022. Cryptocurrency trading is illegal in Jordan. A central bank proposal to introduce crypto trading met with resistance in the parliament.