The Massachusetts Institute of Technology (MIT) Digital Currency Initiative (DCI) and associated organizations marshaled 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 on Jan. 13.
In spite of a growing body of work related to CBDCs, “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 particularly emphasized the differences between intermediated and non-intermediated (cash) payments, saying:
“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 says:
“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 says:
“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.