The Central Bank of Jordan is making progress towards a retail central bank digital currency (rCBDC) with the completion of an International Monetary Fund (IMF) technical report on the country’s markets.
The IMF carried out a three-month mission last year to assist the bank with preparing a feasibility report on CBDCs, with the report being released on Feb. 23.
During the period from July to September 2022, the IMF evaluated the existing retail payment market in Jordan and offered a mostly positive assessment, stating that it was well-integrated.
According to the report, two non-bank payment service providers (PSPs) have “generally accessible and appropriate products,” and the country has high smartphone penetration.
Nevertheless, the introduction of an rCBDC could promote financial inclusion by providing services to people who do not have smartphones.
Furthermore, an rCBDC could enhance the domestic payment system by making its infrastructure accessible to PSPs and lowering the cost of cross-border transfers.
The IMF has cautioned against disintermediation in the Jordanian financial system, as it could contribute to instability during periods of stress.
The IMF’s evaluation discovered that the Jordanian financial sector has strong information security governance and management practices. However, an rCBDC could increase cybersecurity risks since it would be an attractive target.
The report advised that “sound legal underpinnings for an rCBDC should also be created.”
The report concluded that while an rCBDC may offer some advantages, it may not necessarily address pain points.
Conversely, a cross-border rCBDC may be beneficial, particularly if the authorities coordinate with other countries in the region.
An rCBDC would not address issues like low financial literacy and the persistence of a cash-based culture.
It is worth noting that the Jordanian central bank announced in February 2022 that it was investigating the possibility of issuing a CBDC, but cryptocurrency trading is illegal in Jordan.
The central bank’s proposal to allow crypto trading was met with resistance in parliament.
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