The future of Pacific Island means of exchange is being rethought in the age of digitalization of our goods and services. As Pacific island countries face challenges of financial inclusion and connectivity, the International Monetary Fund (IMF) recommends the adoption of stablecoins and central bank digital currencies (CBDC) to stimulate the economy.
IMF sees digital currencies as a viable option for Pacific islands
In a 58-page report published on Monday March 25, the International Monetary Fund (IMF) analyzed the potential impact of stablecoins and central bank-issued digital currencies (CBDCs) on the economic development of Pacific island nations.
The document points out that dozens of countries and micro-states located in the Pacific island region face numerous economic challenges, including limited and unequal access to financial services which contributes to persistent poverty and inequality.
Limited and unequal access to financial services contributes to persistent poverty and inequality. Countries are also heavily dependent on remittance flows, making them disproportionately affected by the decline in correspondent banking relationships.
Extract from IMF report
The IMF believes that digital currencies could help Pacific island countries overcome these obstacles.
The international financial institution stressed that Pacific island countries could benefit from the digital currency revolution by developing efficient payment systems, expanding financial inclusion and mitigating the loss of corresponding banking relationships.
Currently, no Pacific island country officially uses stablecoins, while only a few, such as Fiji, Palau, Solomon Islands and Vanuatu, are exploring the possibility of a CBDC.
Stablecoins, an alternative for small, independent economies
The IMF has also referred to potential role of stablecoins backed by foreign currencies for countries without their own currency. However, the institution expressed reservations about issuing stablecoins by small Pacific island countries, due to their limited surveillance capabilities.
The report stresses the need for a robust regulatory framework and rigorous supervision to oversee the use of stablecoins.
The IMF recommends Pacific island countries to adopt a gradual and considered approach, taking into account their specific monetary and financial characteristics. The adoption of stablecoins and CBDCs appears to be a promising opportunity for Pacific island countries, faced with challenges of financial inclusion and connectivity.
As a journalist at Coinpri, I’ve been captivated by the world of bitcoin and blockchain since 2020. The decentralized aspect of Bitcoin particularly piqued my interest. Since then, I’ve been working constantly to spread my knowledge, hoping one day to see a world where everyone fully enjoys their financial freedom.
