Despite challenging global market conditions in 2022, the digital world has continued to evolve. Forecast to become a $13tn business by 2030, the metaverse economy offers a growing range of revenue streams, while e-commerce and internet of things payment markets are also projected to thrive.

Alongside these developments, central bank digital currencies enable banks and non-banks alike to build inclusive and pioneering digital schemes, products and services, bridging the gap between cash and the digital world.

Emerging markets like Ghana and Eswatini are ahead in unlocking the value of CBDCs, leading the way in digital payments innovation. Developed markets can benefit from the pioneers’ learnings.

This will give them the confidence to follow the example of emerging markets and take bold steps towards digital public finance by developing an entirely new infrastructure for economic growth.

CBDC adoption is supported in countries with less developed financial infrastructures or less competitive consumer options. Yet another common feature that distinguishes these emerging markets is a keen awareness of the need to innovate.

As a digital form of cash, CBDC offers benefits such as convenience, security and cost-effectiveness. It also fuels digital transformation by providing network effects. This is vital for creating effective competition and efficiency through interoperable payments platforms.

Emerging markets are seizing these opportunities to innovate and keep pace with the changes in digital finance. For example, Giesecke+Devrient carried out a successful CBDC pilot with the Bank of Ghana, where swift integration of financial intermediaries is enabling the frictionless flow of CBDC between mobile money and bank accounts.

This project highlights the benefits of interoperability in supporting seamless user experiences and new business opportunities. Ghana is now set to use the insights and feedback from the trial to support wider rollout plans.

The key to a successful CBDC implementation is close collaboration between the public and private sectors. After all, central banks shouldn’t and don’t want to compete with private financial institutions. The CBDC ecosystem should be created through the division of roles between the public and private sectors. The public sector only interacts when there are gaps to be filled.

The private sector innovates on platforms and interacts with consumers and merchants while central banks provide open infrastructure. This is why early stakeholder engagement is so important. Financial intermediaries are critical to adaptation, proliferation and widespread adoption.

Countries like Ghana and Eswatini are trying to create diverse ecosystems where central banks provide the basic infrastructure and private players develop services and products for their customers. These public-private partnerships create trust in currencies and the convenience of innovative financial services.

Everyone should have access to convenient and secure digital payments and other financial services. CBDC can make this a reality. It is a digital version of physical cash — a ubiquitous and fully inclusive financial instrument that people can use independently from the issuer.

For the 1.4bn unbanked adults globally, as well as unbanked children who form the next generation, CBDCs promote participation in the digital economy.

This should also inspire developed nations to leverage offline functionality, where a bank account is not needed, and introduce a digital form of public currency that is simple, resilient and universally accepted.

CBDCs could ease life for many people by offering a cheaper way for cross-border payments for migrant workers or enabling digital payments for small merchants like rural market vendors.

A collaborative CBDC ecosystem that can shape the digital economy of the future will provide opportunities for rapid adoption and significant growth.

It is difficult to imagine all the future use cases for CBDCs and the new business models it could bring, but by providing a credible and trustworthy utility infrastructure, CBDCs can serve as a platform for innovation that is secure and accessible to all.

This will create added value for society and will be a driving force for future innovation and inclusion worldwide. The world with CBDC is coming. Emerging markets are paving the way for a reimagined digital economy.



Originally published at  on February 9, 2023.