The Arab Monetary Fund (AMF) is not game for introducing a central bank digital currency (CBDC) to its economic system. The financial body has proposed the decentralised RippleNet network as an alternative to CBDC. The network's native XRP cryptocurrency has been called unique in nature, citing the premise of its creation — 'primarily for payments'. XRP crypto coin was released in 2012 and has a current market cap of over $39 billion (roughly Rs. 2,98,146 crore), as per CoinMarketCap.
CBDCs have a considerable risk of rendering fiat currencies powerless, a report by AMF's Arab Regional Fintech Working Group has claimed.
“There are many risks associated with the international positions on local CBDCs ranging from the risk of ‘digital dollariastion,' international spillovers, and the impact on the international role of currencies. If a CBDC is used outside of its jurisdiction successfully, this could lead to a local currency losing its function as a medium of exchange, unit of account, storage of value, and eventually raises financial stability risks,” the report noted.
The potential threat of non-residents using CBDCs leading to an increase in exchange rate volatility has also been mentioned in the report.
Along with RippleNet, other CBDC alternatives named by the AMF include the SWIFT payments system, banking application Revolut, and London-based fintech company Wise.
CBDCs are blockchain-based financial assets, regulated by central banks. They are an alternative to cryptocurrencies like Bitcoin and Ether, which are also based on blockchain technology but are not managed by a centralised authority.
India is one of the countries working on bringing its own CBDC, tentatively called the ‘Digital Rupee'. The Reserve Bank of India (RBI) will be issuing, regulating, and monitoring this digital asset.
Russia has begun the trials of its CDBC, the ‘Digital Ruble'.
Last week, Ghana's central bank outlined details on its ‘eCedi' digital currency that it hopes will bring more people to join the national banking system.
Jamaica's ‘Jam-Dex' is also ready for roll out.
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