MIT, Maiden Labs examine CBDC inclusiveness issues in report from four countries

The Massachusetts Institute of Technology (MIT) Digital Currency Initiative (DCI) and associated organizations marshalled a sizable team of researchers in four low- and middle-income countries – India, Indonesia, Nigeria, and Mexico – to study inclusion issues related to retail central bank digital currency (CBDC) design. They released the results of their 15-month research project Jan. 13.

In spite of a growing body of work related to CBDC, “few if any proponents have offered practical insight into how CBDC will promote greater access to financial services,” the DCI, along with the MIT Media Lab and Maiden Labs, claimed.

The authors considered CBDC design options, existing financial infrastructure and user experience, based on real examples from people’s lives. They particular emphasized differences between intermediated and non-intermediated (cash) payments. They said:

“An important potential risk is that an intermediated CBDC will replicate the design – and therefore the harms – of existing intermediated money forms.”

The six CBDC pilots and projects existing today all use intermediated models. The researchers remained neutral in regard to intermediation and blockchain, or distributed ledger, technology (DLT). Echoing a conclusion the DCI reached in its first Project Hamilton report, this report said:

“The question of whether to use DLT technologies is really about governance and trust, with some related issues around performance, rather than about its capability to achieve specific features.”

The report went on to compare five affordances (“what a user can do with a technology”) in intermediated and non-intermediated systems and the real-world uses and challenges they hold for vulnerable users. About a quarter of the world’s adult population is unbanked, and many of those people lack identification.

Related: Nigeria revisits its payments landscape amid sluggish eNaira adoption

Trust was as serious a concern as practical issues for many vulnerable users. The report said:

“Especially considering the rise of authoritarian regimes around the world, the acceleration of the surveillance state, and the increasing challenge of regulating the technology industry, it is far from self-evident that people should trust a CBDC.”

The report concluded with a list of a dozen related research topics.

The MIT Digital Currency Initiative (DCI) has published a paper on the potential benefits and preconditions necessary for a CBDC to improve access to financial services and promote inclusion. Here are the key take aways (1/7)#Future #CentralBanks #CDBC #digitalcurrency pic.twitter.com/YotFy52NcY

— Bilal (@TheBilalVictor) January 13, 2023