CBDC & lebanon

CBDC is a hot topic of conversation worldwide & the world’s future payment ecosystem may be comprised of multiple digital currencies

But Most importantly, Digital currency derives its value primarily from confidence https://twitter.com/IMFNews/status/1317796319851913217

Digital currency is likely to benefit the economy by reducing transaction costs,expanding the power of CBs to intervene in the economy via helicopter money& negative interest rates, traceability &programmability,producing a timely picture of current markets & economic behavior...

However CBDC acts like a fiat money with different structure

CBDC is disruptive for fractional reserve system where banks have to replace deposits with more reliable sources of funding

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As per BIS if CBDC is well designed it can prevent financial instability & threats to macro financial stability are limited

Efforts from IMF ... are being undertaken to improve cross border payments issues and reforms & implications on exchange rates are not finalized

Launching a digital currency in lebanon would work if it restores people's confidence in the system &if combined with actual reforms to reboot the economy

It wd also make it easier to impose capital C,lower transaction costs&cost of printing money in FX,traceability,inflation...

however (1) financial costs to implement a CBDC system is significant (2) bdl could lose its seigniorage income currently needed to inflate its assets...if people don’t have confidence in the currency or the issuer they would still use cash ...