The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has expressed concern about the unknown consequences that could arise from the introduction of retail central bank digital currencies (CBDCs).
In an interview at the Milken Institute’s 2023 Global Conference, Georgieva stated that while the IMF believes wholesale CBDCs can be introduced with little space for error, retail CBDCs could transform the financial system in ways that are currently unclear. Wholesale CBDCs allow financial institutions to carry reserve deposits with a central bank, while retail CBDCs are state-backed virtual currencies issued by central banks for use by consumers and businesses.
The IMF is working with around 50 countries to ensure that best practices are adopted for CBDC design and implementation, with a handbook planned to be published for central banks to assist with the process. Nigeria introduced its own CBDC, the eNaira, on October 25, 2021, making it one of the first countries in the world to do so.
The eNaira is a digital currency denominated in naira, defined by the Central Bank of Nigeria (CBN) as a medium of exchange and a store of value. As of December 2021, the eNaira consumer wallet had over 583,000 downloads, while the merchant wallet had 83,000 downloads from over 160 countries.
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CBN Governor Godwin Emefiele announced that e-Naira transactions had reached around N1.4m as of March 31, 2023, stating that the pandemic had led to rapid advancements in financial technology that allowed for the digitisation of money and finance. Emefiele added that the eNaira was launched in response to the pandemic, with the goal of increasing digital financial inclusion and providing faster intergovernmental and social transfers.
The CBN has been modifying the eNaira’s features to make it more accessible to a wider range of users, with the digital currency becoming compatible with all generations of mobile devices.
