Bahrain Becomes Next Country to Trial Digital Currency
The central bank of Bahrain is the first to pilot a new toolkit developed by the world economic forum. This toolkit will help Bahrain’s central bank determine if a Central Bank Digital Currency (CBDC) is the right fit for the gulf kingdom. Other nations considering CBDCs will also be using the toolkit in the future.
Bahrain Jumps on CBDC Bandwagon
The central bank of Bahrain has been chosen as the first central bank to employ the World Economic Forum’s (WEF) newly released tool kit for determining if the Middle Eastern nation would benefit from implementing a CBDC. A CBDC is a digitized sovereign currency issued by a nation’s central bank, which would be similar to current public blockchain networks. Bankers and policy makers have done a 180 degree turn on cryptocurrencies and are now considering issuing their own.
The WEF consulted with central bank researchers, global policy makers, international organizations and experts from over 40 institutions to create the CBDC Policy-Maker Toolkit. The toolkit is designed to help nations decide on the viability of CBDC on a case by case basis. It is WEF’s hope that the toolkit will provide risk-aware information to policy makers, so they can better understand the tradeoffs and benefits of deployment of CBDCs.
The document is intended to be a framework to assess the costs, risks, benefits, and retail, wholesale, cross‑border CBDC and alternatives in private money such as “hybrid CBDCs”. It will give guidelines for large developed economies as well as emerging developing economies. It will allow the country’s monetary authority to make policy decisions in a climate where no existing policy is available for reference.
CBDCs have taken center stage at Davos this year
One of the hottest topics at this year’s World Economic Forum in Davos, Switzerland has been the discussion of CBDCs. China’s announcement of their own CBDC has sparked a financial “arms race” so to speak. The Bank of International Settlements recently partnered with various central banks around the world to form a study group to analyze CBDCs and how to implement them.
Commodity Futures Trading Commission Chairman J. Christopher Giancarlo also recently announced a “FEDcoin” digital dollar project. While the European Central Bank recently released a study on how to maintain financial privacy and anonymity in the face of regulatory concerns, money laundering safeguards, and anti-terror finance laws.
Bahrain has been a leader in blockchain in the Persian Gulf. Last year, they released regulatory guidelines for blockchain startups, and have encouraged blockchain businesses to set up shop. Bahrain is also a leading financial hub for the Middle East and North Africa. Last February, they opened Fintech bay, a tech sector with over 30 blockchain and financial services startups. Bahrain also made headlines for granting a regulatory license to Rain, the first Sharia law compliant cryptocurrency exchange.
The kingdom of Bahrain has certainly become a leader in the region in regards to cryptocurrency and blockchain policy, so it makes sense that they would also be a leader in the region for pioneering CBDCs. We’ll be keeping an eye on further developments form the gulf nation.
Do you think CDBCs will be able to compete with public blockchain networks in the future? Add your thoughts below
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