Central Bank Digital Currencies: A New Tool in the Financial Inclusion Toolkit?

Central banks are considering how retail central bank digital currencies (CBDCs) may help support financial inclusion. While they are not a magic bullet, central banks see CBDC as a further tool to promote financial inclusion if this goal features prominently in the design from the get-go. In particular, central banks are considering design options around promoting innovation in the two-tiered financial system, offering a robust and low-cost public sector technological basis, facilitating enrolment and education (via simplified due diligence and electronic know your customer) and fostering interoperability. Together, these features can address a range of existing barriers to financial inclusion.

This paper draws on interviews with nine central banks with advanced work on CBDCs and financial inclusion, as well as ongoing research and policy work at the BIS and World Bank. It gives concrete examples from the central banks' work and discusses challenges, risks and regulatory and legal implications. It aims to facilitate peer learning on a key set of issues around CBDCs and financial inclusion policy faced by societies around the world.

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By Raphael Auer, Holti Banka, Nana Yaa Boakye-Adjei, Ahmed Faragallah, Jon Frost, Harish Natarajan & Jermy Prenio