The Central Bank of Jordan is closer to the next step towards a retail central bank digital currency (rCBDC) by finalizing an International Monetary Fund technical report on the country’s market. The IMF undertook a three-month mission last year to assist the bank with the preparation of a CBDC feasibility report. The IMF published its report on February 23.
Working between July and September 2022, the IMF gave the existing retail payment market in the country a very positive review, saying it is well integrated. The two non-bank payment service providers (PSP) have “generally accessible and suitable products” and the country has high smartphone penetration, the report noted.
However, rCBDC will improve financial inclusion by providing services to citizens without smartphones. RCBDC can also improve the domestic payment system by making infrastructure available for PSPs and reduce cross-border transfer fees.
Jordan’s IMF technical assistance on Cross Border Digital Currency (rCBDC): “cross-border rCBDC can add value, especially if authorities coordinate with other countries in the region.” #CBDC https://t.co/zlTeY8waB9
– Kevin Carey (@Kevin_Carey_WB) February 22, 2023
The IMF warned against disintermediation in the Jordanian financial system, as it could lead to instability during times of stress. Jordan’s financial sector has good governance and information security management practices, the IMF found, but rCBDC could increase cybersecurity risks as an attractive target. “Sound legal underpinnings for rCBDC should also be made,” the report said. Finally:
“RCBDC may provide some benefits, but it does not necessarily solve pain points. On the other hand, cross-border rCBDC can add value, especially if authorities coordinate with other countries in the region.
Low financial literacy and a persistent cash culture are one of the pain points that rCBDC will not address.
Related: IMF executive board approves crypto policy framework, including no crypto as legal tender
Jordanian central bank announces CBDC research in February 2022. Cryptocurrency trading is illegal in Jordan. The central bank’s proposal to introduce crypto trading met with resistance in parliament.