Concerned about the backlash against these digital currencies, IMF officials presented a four-phase proposal to promote their use.
- They call on politicians and banks worldwide to do more to increase the adoption of CBDC.
- The proposal envisions offering gains and even mandating their use through new laws.
With the implementation of a series of strategies aimed at preventing people from rejecting central bank digital currencies (CBDC), the International Monetary Fund launched a plan aiming to stimulate their global adoption. They presented the plan on September 21 as part of a document titled “Central Bank Digital Currency Adoption.” The document has recommendations involving politicians and central banks. According to IMF officials, adopting CBDCs will require implementing proactive policies. They have to design decisions perceived by intermediaries (banks) and end users as beneficial.
The idea is to devise strategies to motivate using CBDCs through a high-level framework. It has four pillars that, according to the IMF, will serve as an incentive. They call it REDI, an acronym for regulation, education, design, and incentives. Thus, the starting point is implementing laws to provide a legal framework for CBDCs and encourage compliance. The initiative contemplates declaring them legal tender and establishing their use as mandatory.
Education
Regarding education, they recommend developing communication strategies to raise awareness about CBDCs and teach how to use them. “Educational initiatives should guide consumers step-by-step on how to safely handle digital wallets, conduct transactions, monitor their holdings, and understand the risks,” the IMF notes. On the design side, they recommend central banks focus on specific user groups. They recommend leveraging intermediaries to create a wide distribution and acceptance network for CBDCs.
On the incentive side, they talk about offering monetary and non-monetary forms of profit, including benefits ranging from not charging commissions, subsidizing costs to banks or companies that participate as intermediaries, creating new services with CBDCs, and monetizing user data (with their consent). They also propose to offer discounts and gifts for their use.
In that sense, China and Jamaica offered some of these incentives with the digital yuan and the Jam-Dex, the most advanced CBDCs. Regional governments in China’s pilot areas handed out 180 million yuan in CBDC red packets and discounts, while Jamaican consumers received a 2% rebate on CBDC purchases. Despite this, users reject most market-ready CBDCs. However, China reached a higher level of acceptance through these incentive strategies.
Despite the public rejection, most governments with CBDC projects are steadfast in moving forward with their plans, which has led many governments to broaden the targets or launch wholesale currencies so people may use them for cross-border payments.