A new BIS report finds that stablecoins are “neither necessary nor sufficient” to tackle challenges related to financial inclusion and remittances in developing countries
Stablecoins and central bank digital currencies may not live up to their promise of increasing financial inclusion and improving cross-border payments in emerging markets, according to a newTitled “What Does Digital Money Mean for Emerging Market and Developing Countries,” BIS claims digital currencies like stablecoins and CBDCs may create formidable issues in emerging markets and developing economies and fail to address problems that other fintech innovations are tackling.
Several EMDEs have been looking to digital currencies to address weaknesses in their financial systems. By cutting out financial intermediaries, digital currency proposals aim to empower users and make domestic and international payments more efficient as the digital economy grows. The BIS report questions whether stablecoins – which have not yet been tested at scale – could “offer lasting competitive advantages over rapidly developing, evolving digital payment services,” such as e-money, digital ID and mobile banking.
On the question of CBDCs, BIS believes “there is a risk that in periods of systematic stress, [that] households and other agents may shift from bank deposits or other instruments into the CBDC, spurring a ‘digital run’ of unprecedented speed and scale,” and questioning how desirable or necessary they are for all jurisdictions.
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