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Browsing: central banks
When CBDCs first came to the fore, many touted such a move as a game-changer in digital finance. Many had thought that the adoption of CBDCs in Africa would take the shape of the adoption of cryptocurrencies, where the region leads in many aspects. However, challenges remain. Lack of the requisite infrastructure, low levels of financial literacy, and operational and regulatory challenges have combined to contribute to low penetration and adoption rates for CBDCs.
The lack of adoption is a current failure point for many launched CBDCs. Nigeria’s eNaira had a million customers one year into its launch, a smattering of its 221 million population. The real challenge of CBDCs lies in developing a clear sense of purpose. African central banks must answer to the kind of role that CBDCs will play in the economy and financial systems.…
There appears to be a consensus that the world is finally turning its back on the US dollar. There are simmering shifts within the global monetary system. The shift becomes ever more apparent, best described as de-dollarisation.
The world is searching for alternatives to the US dollar, finding them more often. Thus, moving away from the dollar can no longer be stopped. For instance, early this year, Indonesia reiterated it would promote local currency settlement (LCS) in cross-border trade and investment to reduce dependence on the US dollar.…
Countries must continue to work to mitigate their vulnerabilities over time. This involves minimizing balance-sheet misalignments, establishing money and foreign exchange markets, and lowering exchange rate passthrough by increasing monetary policy credibility.
However, in the short term—while vulnerabilities remain high—the use of extra instruments may assist relieve short-term policy trade-offs when certain shocks occur. In particular, foreign exchange intervention, macroprudential policy measures, and capital flow controls may help increase monetary and fiscal policy autonomy, promote financial and price stability, and minimize output volatility if reserves are enough and these instruments are available.…
Changes in monetary policy may have a substantial influence on all asset classes. However, by understanding the subtleties of monetary policy, investors may position their portfolios to profit from policy shifts and increase returns.…