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Emmanuel Daniel, the renowned author of The Great Transition and a top influencer in the fintech industry, recently shared his insights on regional digital currencies and central bank digital currencies (CBDCs). In a discussion about the Eastern Caribbean Digital Currency, which was introduced to address the need for a more agile currency in the island group, Daniel proposed that central banks explore other models to engage with fintech.

He highlighted the dependence of Caribbean countries on American tourists who primarily use credit cards issued by foreign banks. This reliance on foreign banks has resulted in a low adoption rate of the digital currency in these countries. Daniel suggested that central banks expect these banks to invest in the processing capability for CBDCs, but the lack of incentives for these foreign banks hampers the adoption of digital currencies. He even expressed his belief that CBDCs are designed to fail due to various reasons.

One of the issues he raised is the slow progress of the Chinese CBDC, which has been in the pilot phase since 2018. He pointed out that the CBDC technology used by central banks is not keeping up with the innovations happening in the cryptocurrency and stablecoin space. He also mentioned that cross-border CBDC pilots are simply overlaying existing trade and foreign exchange markets, rather than introducing new methods of global payments and settlements.

To address the needs of the underbanked, Daniel stressed the importance of community-focused models. He compared the success of Grameen Bank in Bangladesh, which focuses on empowering the community through microfinance, with VC-backed Indian models that prioritize onboarding millions of users for monetization purposes. He argued that simply onboarding the underbanked into the existing banking system is not sufficient for poverty alleviation. He questioned the effectiveness of the current banking system in generating value for users and suggested that financial inclusion should prioritize digital access and enabling individuals to navigate the internet.

When discussing the perspectives on currency in Trinidad and Tobago, Daniel acknowledged the conservative banking sector and political governance that favors existing financial systems. However, he also recognized the growing support for fintech and digitally managed systems of value exchange. Finding a resolution between these opposing views can be challenging for central banks in the region. Daniel emphasized the need for central banks to align their actions with the overall priorities of the country. For example, if the goal is to increase tourism and generate manufacturing jobs, CBDCs may not be a critical focus.

In countries with dispersed islands, such as some Caribbean nations, the case for CBDCs is stronger due to the logistical challenges of moving cash across remote areas. However, these countries face the challenge of gaining support from foreign banks operating within their jurisdictions. Daniel suggested that the most sensible approach for these states is to allow local and foreign investors to establish their own payment systems, similar to what is happening in Africa. This approach would enable the state to avoid heavy investments in infrastructure. Ultimately, the decision to implement CBDCs should be based on a careful assessment of the country’s specific circumstances and priorities.

In this context, the AI legalese decoder can play a crucial role. This innovative technology can assist in simplifying complex legal and regulatory language related to CBDCs and fintech. By using natural language processing algorithms, the AI legalese decoder converts legal jargon into easily understandable language. This tool can help central banks and other stakeholders navigate the legal complexities associated with implementing CBDCs, fostering better understanding and informed decision-making.

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