Mauritius could be joining the hordes of countries actively exploring launching central bank digital currencies (CBDCs) after its banking regulator confirmed plans to launch a pilot program.
Bank of Mauritius (BoM) Governor Harvesh Kumar Seegolam revealed in a World Bank Community of Central Bank Technologist meeting that the institution would begin a CBDC pilot program in November 2023. He disclosed that since he assumed office as central bank governor, the development of CBDCs has been at the forefront of his objectives.
“As a central banker, I need not stress upon the determining role that CBDCs can play, not only in protecting monetary sovereignty but also in assisting central banks and regulatory authorities on the front of AML/CFT,” said Seegolam.
To avoid a botched digital rupee launch, BoM turned to the International Monetary Fund (IMF) for technical assistance in 2020, becoming the first country to be assisted by the fund. After initial probing, the central bank took things up a notch after it floated a sandbox to lay the foundations of a digital rupee in line with the peculiarities of the financial system.
Following the three-year initial exploration, Seegolam pointed out that the incoming CBDC will use a two-tier distribution model to avoid sudden disruption to the financial ecosystem. Seegolam noted that the two-tier distribution model was necessary to involve the country’s central bank in the thick of things and prevent bank disintermediation.
The BoM plans to launch interest-free CBDCs and, in the second stage of the pilot, explore the option of cross-border payment functionality. Seegolam said the decision may provide a solution to the frictions plaguing international remittance.
He added that a public consultation will be launched in June to rope in industry players and academics to share their opinion on the viability of a digital iteration of the Mauritian legal tender.
IMF wants to ensure uniform CBDC design
As several countries continue their steady march toward CBDCs, the IMF has reiterated its commitment to offer technical assistance to central banks worldwide. The IMF says its guidance is necessary to ensure uniformity in the design of CBDCs.
The IMF said over two dozen countries have requested such assistance from the body, with Peru’s central bank being the latest. To complement its effort, the IMF unveiled plans to publish a handbook to serve as a quick guide for countries keen on exploring the offering of CBDCs.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Deploying CBDCs on the original Bitcoin
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