Jordan’s Journey Towards a Retail Central Bank Digital Currency

Progress Report from the IMF

The Central Bank of Jordan is on the brink of an exciting development: a retail central bank digital currency (rCBDC). The journey took a significant step forward with the International Monetary Fund (IMF) releasing a technical report after a comprehensive three-month mission last year. The findings were published on February 23 and suggest that Jordan is getting closer to making a digital leap into the future of currency.

The Positive Outlook on Payment Systems

During the assessment from July to September 2022, the IMF had mostly good things to say about Jordan’s retail payment market. It noted an impressive level of integration and accessibility, particularly highlighting two non-bank payment service providers (PSPs) that offer products that are easy to use for the general public. With a high penetration of smartphones in the country, one might think everyone is set for a seamless digital experience.

Bridging the Gap: Financial Inclusion

However, here’s where the rCBDC shines: it’s not just for those who can afford the latest gadget. One of the key advantages of introducing an rCBDC is its potential to enhance financial inclusion. By offering services that cater to those without smartphones, it could open up new avenues for many residents to engage with the financial system.

A Boost for Domestic Payments

Beyond inclusion, there’s the potential to improve the domestic payment infrastructure dramatically. An rCBDC could allow PSPs access to a well-structured payment system, streamlining operations and potentially lowering costs associated with cross-border transactions. Who wouldn’t want to save a few dinars when transferring funds abroad?

But Beware the Risks

Of course, it’s not all sunshine and rainbows in the digital currency landscape. The IMF report comes with a cautionary tale about disintermediation possibly destabilizing the Jordanian financial sector during tough times. Though the existing banking system is fortified with good information security governance, an rCBDC may become an enticing target for cyber attacks. To protect this budding initiative, the IMF stresses the importance of laying down solid legal foundations for the rCBDC.

Addressing Pre-existing Pain Points

Lastly, while an rCBDC can bring about several benefits, it won’t solve all the problems in Jordan’s economic landscape. Issues like low financial literacy and a culture steeped in cash transactions are persistent challenges that the introduction of a rCBDC alone may not tackle. It’s clear that the journey towards a digital future is highlighted with both promise and hurdles.