Central Bank Digital Currencies and the Emerging Markets: The Currency Substitution Challenge

Abstract

The implications for emerging countries of the adoption of central bank digital currencies (CBDCs) in advanced jurisdictions, such as the United States, the United Kingdom, and the Euro Zone, are now well-discussed. Unlike today’s common cryptocurrencies, these digital currencies are linked or will be linked to national currencies Some of the benefits of global CBDC are lower-cost international, including immigrants’ remittances. CBDCs are also associated with currency substitution, sudden currency depreciation, and lower seigniorage. At the global level, a smooth rollout of CBDCs writes the author, requires international coordination. As for emerging countries, they should benefit from stronger macroprudential regulations.

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