Central Bank Digital Currencies: A Potential Response to the Financial Inclusion Challenges of the Pacific
Many Pacific island countries are among the world’s most remote and geographically dispersed. As such, financial inclusion remains a major challenge, with many in the region still lacking access to financial services. This policy brief considers whether central bank digital currencies (CBDCs) can promote the accessibility of financial services across the Pacific islands and the design choices involved in their development.
The brief suggests that CBDCs may offer a highly efficacious solution to (i) the problem of high remittance costs that currently serve as a tax on the earnings of Pacific islanders abroad when they send money home, and (ii) the financial inclusion challenges of the region. However, implementation of these digital currencies is a significant challenge. The development of a safe, efficient, and accessible CBDC is likely to require Pacific island country regulators to redirect scarce resources away from pressing challenges. For this reason, this brief concludes that now is not the time for countries in the region to issue a CBDC, but it is the time to begin to develop the expertise and understanding.