The Arab Monetary Fund (AMF) is not a game to introduce a central bank digital currency (CBDC) into its economic system. The financial authority has proposed the decentralized RippleNet network as an alternative to CBDC. The network’s native XRP cryptocurrency is called unique in nature, citing the premise of its creation – ‘primarily for payments’. The XRP cryptocurrency was released in 2012 and has a current market capitalization of over $39 billion (approximately Rs. 2,98,146 crore), according to CoinMarketCap.
CBDC there is a substantial risk of rendering fiat currencies impotent, report announced by the AMF Arab Regional Fintech Working Group.
“There are many risks associated with the international standing for domestic CBDCs, ranging from the risk of ‘digital dollarisation’, international spillover, and the impact on the international role of the currency. If a CBDC is successfully used outside of its jurisdiction, this could result in the local currency losing its function as a medium of exchange, unit of account, store of value and ultimately increasing financial stability risks,” the report notes.
The potential threat of non-resident use of central business districts resulting in increased exchange rate volatility was also addressed in the report.
Along with RippleNet, other CBDC alternatives named by the AMF include the SWIFT payment system, banking app Revolut, and London-based fintech firm Wise.
CBDCs are blockchain-based financial assets, regulated by central banks. They are an alternative to cryptocurrencies like Bitcoin and Etheralso based on blockchain technology but not managed by a centralized authority.
India is one of the countries that is working on building its own CBDC, so-called ‘Digital Rupee’. The Reserve Bank of India (RBI) will issue, manage and oversee this digital asset.
Russia started testing CDBC, ‘Digital Ruble’.
Last week, Ghana’s central bank outlined details of ‘eCedi’ digital currency that it hopes will bring more people into the national banking system.
From Jamaica ‘Jam-Dex’ is also ready for deployment.
