IMF’s New REDI Strategy: The Key to Successful CBDC Adoption
CBDC isn't crypto. You can't throw it out there and expect people to use it.
The IMF wants to foster CBDC adoption by addressing people’s readiness to adopt CBDC and improving their design through its “REDI” framework.
It’s a great read and shows the good and bad of current CBDCs.
The IMF’s REDI provides a strategy and recommendations for central banks and policymakers to consider before launching a CBDC to ensure success.
One thing is clear: central banks cannot take it for granted that once they launch a CBDC, everyone will rush to use it.
We’ve seen in the first few countries to launch or pilot CBDCs that adoption remains slow because people weren’t “ready” or the designs didn’t meet their needs.
This REDI strategy is LONG overdue, and central banks need to improve at building and marketing CBDCs people want to use.
👉TAKEAWAYS
The REDI strategy:
🔹 Regulation
Potential regulatory and legislative measures that policymakers can employ to prepare for CBDC adoption include intermediary participation, the legal tender status of CBDC, regulating or directly setting user fees, and establishing minimum quality standards.
🔹 Education
Policymakers can craft effective communication strategies to educate stakeholders and build awareness about CBDC, which will be key in fostering adoption. Central banks play a pivotal coordination role by facilitating communication and can act as a central point of communication, leveraging industry partners which may be more familiar with consumer education.
🔹 Design and deployment
Central banks can design CBDC to foster its acceptance and adoption by potential users. It also discusses deployment or roll-out strategies, such as by prioritizing the implementation of selected use cases, targeting specific user groups, and leveraging intermediaries in creating an extensive network of CBDC distribution and acceptance points
🔹 Incentives
Monetary and non-monetary incentives that central banks may consider providing to intermediaries and end-users to encourage their active participation. It is important to note that offering monetary incentives to stakeholders may have fiscal consequences and carries the risk of such incentives being misused.
👊STRAIGHT TALK👊
Slow adoption of CBDCs in some trial and pilot nations is already causing some to call CBDCs failures. I don’t believe this is true.
Early CBDC launches in Nigeria or the Bahamas have shown that building a CBDC is much easier than getting people to use it, and rushing one to market isn’t advisable.
I put the blame for most slow CBDC adoption on central banks and policymakers who didn’t do enough to prepare people for them before launch or, worse, didn’t build CBDCs that met people’s needs.
The problems we’ve seen with CBDC issuance in these early days include: a lack of public awareness and trust, a preference for existing payment methods, and inadequate intermediary incentives.
The IMF’s “REDI” strategy goes a long way to minimize or avoid these problems at launch, and I think it’s a step in the right direction.
One thing the CBDC proponents have learned so far is that CBDCs aren’t crypto, and you can’t throw them out there with the expectation that people will figure out how to use them on their own.
Are your central bank’s CBDC plans REDI?
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