The Arab Monetary Fund (AMF), a sub-organization of the Arab League, has named global payments network RippleNet as a possible alternative to central bank digital currencies (CBDCs).
In a new report, the AMF’s Arab Regional Fintech Working Group says there is considerable risk for a nation to issue a CBDC, including the possibility that local currencies eventually lose their basic utility.
“There are many risks associated with the international positions on local CBDCs ranging from the risk of ‘digital dollarization,’ 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.
In addition, issuing CBDCs to nonresidents can result in an increase in exchange rate volatility and change in capital flow dynamics since CBDC characteristics make them appealing to investors as an alternative financial instrument.”
The group compiled a list of alternatives to CBDCs that could provide similar utility but with less downside risk. Among those named are the international SWIFT payments system, banking application Revolut, London-based fintech company Wise, and RippleNet, Ripple Labs’ real-time gross settlements system.
Though no specifics were given, the group notes that CBDC alternatives have their own flaws that must be addressed before they see widespread adoption.
“Most of these non-CBDC alternatives have significant limitations or flaws. As a result, many central banks continue to undertake proof of concepts or pilots with CBDC.”
Check Price ActionDon't Miss a Beat – Subscribe to get crypto email alerts delivered directly to your inbox
Follow us on Twitter, Facebook and Telegram
Surf The Daily Hodl Mix
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/Roman3dArt/Natalia Siiatovskaia
